Sunday, December 4, 2011

How do you write off an uncollectible account that exceeds the allowance for doubtful accounts?

For example, suppose you have $100 in the AFDA, $300 in accounts receivable, $100 in bad debt expense, you need to write-off an account of $200. What would the journal entries be?


Would you credit bad debt expense or would you create a separate account called loss on re-estimation and credit that? Would a contra account be involved?|||When using the allowance method, the only time you use the Bad Debt Expense account is when making the adjustment at the end of an accounting period. So for the transaction you've given, you would handle it the same way as any other write off. If the credit balance in the Allowance account is $100 and you need to write off $200, the entry would be:


Dr Allowance for Doubtful Accounts 200


Cr Accounts Receivable 200





The Allowance account now has a DEBIT balance of $100.

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