1. Bad Debts Expense (for receivables)

what is the allowance method for recording bad debts expense?

Allowance method estimates bad debts expense at the end of each accounting period and records it with an adjusting entry

TechCon has credit sales of $300,000 in its first year of operations. At the end of the first year, $20,000 of credit sales were uncollected. TechCom estimates that $1,500 of its accounts receivable is uncollectible. What is the adjusting entry to record this uncollectible amount?

Debit Bad Debts Expense $1,500, Credit Allowance for Doubtful Accounts $1,500.

When using the allowance method, how do you write off the bad debt?

Debit Allowance for Doubtful Accounts, Credit Accounts Receivable - Customer name for uncollectible amount.

How do you recover a bad debt?

1. Reverse the write-off and reinstate the customer’s account - Debit Accounts Receivable - Customer Name, Credit Allowance for Doubtful Accounts

2. Record the collection of the reinstated account - Debit Cash, Credit Accounts Receivable - Customer Name