What is the journal entry for allowance for doubtful accounts?

The entry to write off a bad account affects only balance sheet accounts: a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. No expense or loss is reported on the income statement because this write-off is "covered" under the earlier adjusting entries for estimated bad debts expense.
A.

What type of account is the allowance for doubtful accounts?

The allowance for doubtful accounts is a reduction of the total amount of accounts receivable appearing on a company's balance sheet, and is listed as a deduction immediately below the accounts receivable line item. This deduction is classified as a contra asset account.
  • What kind of account is accounts receivable?

    Accounts receivable is the amount owed to a seller by a customer. As such, it is an asset, since it is convertible to cash on a future date. Accounts receivable is listed as a current asset in the balance sheet, since it is usually convertible into cash in less than one year.
  • What is the most common format for reporting accounts receivable on the balance sheet?

    The most common format for reporting accounts receivable on the balance sheet is gross receivables less the allowance for doubtful accounts. This format allows the users to see both the total amount owed by the customers and the amount the company expects to collect.
  • What is a contra account used for?

    A contra account is a general ledger account which is intended to have its balance be the opposite of the normal balance for that account classification. For instance, a contra asset account is intended to have a credit balance instead of the debit balance normally found in an asset account.
B.

Is a contra asset a debit or credit?

A contra asset account is an asset account where the balance will be either a credit balance or a zero balance. (A debit balance in a contra asset account will violate the cost principle.) The most common contra asset account is Accumulated Depreciation.
  • Is depreciation an expense account?

    The basic journal entry for depreciation is to debit the Depreciation Expense account (which appears in the income statement) and credit the Accumulated Depreciation account (which appears in the balance sheet as a contra account that reduces the amount of fixed assets).
  • Is a note receivable an asset?

    Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any portion of the notes receivable that is not due within one year of the balance sheet date is reported as a long term asset.
  • How can allowance for doubtful accounts have a debit balance?

    If the Allowance for Doubtful Accounts presently has a credit balance of $2,000 and you believe there is a total of $2,900 of accounts receivable that will not be collected, you need to enter an additional credit of $900 into the Allowance for Doubtful Accounts, and you need to enter a debit of $900 into Bad Debts
C.

Is allowance for doubtful accounts is an expense account?

Bad Debts Expense is usually an estimated amount based on a company's credit sales during the period or the change in the collectibility of its accounts receivable. The Allowance for Doubtful Accounts is a contra asset account or valuation account associated with the balance in Accounts Receivable.
  • What kind of account is accounts receivable?

    Accounts receivable is the amount owed to a seller by a customer. As such, it is an asset, since it is convertible to cash on a future date. Accounts receivable is listed as a current asset in the balance sheet, since it is usually convertible into cash in less than one year.
  • What is a contra asset account?

    A contra asset account is an asset account where the balance will be either a credit balance or a zero balance. (A debit balance in a contra asset account will violate the cost principle.) The most common contra asset account is Accumulated Depreciation.
  • Is uncollectible accounts expense the same as bad debt expense?

    Some people will use these terms or account titles interchangeably: Bad Debt Expense, Doubtful Account Expense, Uncollectible Account Expense. (Generally, the Allowance account will have a credit balance—whereas Accounts Receivable and other asset accounts normally have debit balances.)

Updated: 4th December 2019

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