Question

What happens if the amount of Bad Debt Expense is overstated at year end? A : Stockholders' equity will be overstated. B : Allowance for Doubtful Accounts will be understated. C : Net Accounts Receivable will be understated. D : Net income will be overstated.

Answer 1

Net Accounts Receivable will be understated.

Step-by-step explanation:

Any uncollectible accounts receivable are unpaid debt by customers and constitute a bad debt expense for the company. As a result of not taking into account uncollectible customer accounts, overstating accounts receivable understates a company's bad debt expense.