If the balance in the Allowance for doubtful accounts is a credit of lets say 1,500, we would record the following on the balance sheet:

Current assets:
Accounts Receivable ............................................ 10,000
Less: Allowance for doubtful accounts ...................... 1,500 8,500

But what if the balance is a debit, would we substitute the Less: for Add:, or how would we record that transaction?

Please help.

Thanks.

Well, theoretically, if it had a debit balance, that's the same as the balance in receivables so it would be an add.

But recall that an adjusting entry is made at the end of each year which would get that account back to a credit balance, and that is the one that is going to be reflected on the year-end balance sheet. If the allowance account were to get a debit balance, as long as the estimates are reasonable, it shouldn't happen until towards the end of the year. If it was, say, November when that happened and you were doing montly interim statements, then yeah, technically it would be added. But interim statements like that are usually not totally correct since many adjusting entries are only done at year-end, and the year-end statements are the important ones.