Question: allowance for doubtful accounts has a credit balance of 500?
Answer: Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and Bad Debt Expense is estimated at 2% of sales. If sales are $500,000, the adjusting entry for uncollectible accounts would include: a credit to Allowance for Doubtful Accounts of $10,000.