Answer:
Explanation:
The estimate for doubtful debt serves a very important role in accounting because it ensures that a company is ready for the possibility of bad debt occurring. Without it, a company would have to deal with bad debts as they come and this can damage profit projections.
It is treated as an expense in the business so in reducing it, Margaret is reducing the expenses which will increase the net income. This net income will be overstated however because the estimate for doubtful accounts should be higher than it is.
Estimates for doubtful debt are deducted from the Accounts Receivable balance in the Balance sheet so if it is reduced, the Accounts Receivable balance will not be reduced as much as it should be which would mean that is is overstated or higher than it should be.
