Why would the allowance for doubtful accounts have a credit balance before the adjusting entry? If you estimate the write-off, don't you write-off that amount? Example:
Year 2008 credit sales 8,700,000
Ada credit balance 32820
Using 1/4 of 1%
So the estimate would be 21,750, then would I add the credit balance of 32,820 os the adjusted balance would be 54,570 and that is what I would write-off for the year 2008?
Thanks