Allowance For Doubtful Accounts Normal Balance

The Normal Balance for Allowance For Doubtful Accounts is Credit Balance Because, it is a Contra-Asset or Valuation Account and also it is either estimated on Net Sales or Accounts Receivable and deducted from its Closing Balance in Balance Sheet to provide true, useful and reliable information of Receivables of the company to Users of Financial Statements.

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The Debit Balance of Doubtful Accounts is not Normal as we estimate less on Accounts Receivables while the Actual Bad Debt is more than we expected to recover debts from our customers. In that case, we need to adjust the differences and pass the adjusting entry to match Uncollectible Expense Account With Actual Bad Debts in order to give true and fair view of Financial Statements of the business to Users of Financial Statements.

So, it is all about Allowance For Doubtful Accounts Normal Balance.