Question

Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $3,700 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:

Answer 1

Answer:

The entry will be:

May 3

Dr Allowances for doubtful debt               3,700

Cr Account Receivable                             3,700

(to record written-off of receivables)

Explanation:

As the company uses the allowance method of accounting for uncollectible accounts, the company would actively review and book bad debt expenses for any debt in doubt of collection. The entry would be: Dr Bad Debt Expenses & Cr Allowance for doubtful debt.

When there is sufficient evidences that these debts go default, no more expenses will be recorded, instead, the account receivable will be written off ( Cr) with the offsetting entry is Dr Allowance for doubtful debt.