What is the journal entry to record bad debt expense?
Under the allowance method, the company would establish an allowance for doubtful account reserve, which is a contra-asset. When the company believes there is a risk that they won’t collect $100 from a customer who is going through bankruptcy, then they would debit bad debt expense and credit allowance for doubtful accounts. When the company determines there is no chance the receivable will be collected, it is actually written off.
To write-off a receivable, the company would debit allowance for doubtful accounts and credit accounts receivable.
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