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Overstatement and understatement of allowances

SShuying9y ago
Hi, I came across this question and couldn’t understand the reason behind the answer given. 1. A review of pre year end correspondence with customers to identify any disputed balances. A. Overstatement of allowances B. Understatement of allowances Answer given is B. Why is this so?
kengarrettkengarrettTutor9y ago#1
Seems to me could be either A or B. The client could have made a 100 % allowance for a bad debt, but the correspondence could show that the customer was willing to pay, say 50%.
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