Question

Tunes Company determines that a customer balance of $250 from Able Co. is uncollectible. Tunes uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a (debit/credit) to the Allowance for Doubtful Accounts.

Answer 1

Answer:

The journal entry should be as follows:

Dr Allowance for doubtful accounts 250

    Cr Accounts receivable 250

Explanation:

When you use the allowance for doubtful accounts method, any bad debt written off affects only balance sheet accounts: accounts receivable (asset account) and allowance for doubtful accounts (contra asset account). No expense has to be recorded because an earlier adjusting entry had already recorded an estimation of bad debt expenses.