A business has been accounting for its bad A/R using the Allowance Method. For the last 5 years, the business has used the % of net sales estimation method for estimating the adjusting entry at year-end.  After 5 years, the balance of the Allowence for Doubtful Accounts has grown very large in relationship to the total balance in A/R.  What are 2 possible explanations as to how this could have occurred?

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A business has been accounting for its bad A/R using the Allowance Method. For the last 5 years, the business has used the % of net sales estimation method for estimating the adjusting entry at year-end.  After 5 years, the balance of the Allowence for Doubtful Accounts has grown very large in relationship to the total balance in A/R. 

What are 2 possible explanations as to how this could have occurred?

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