If the allowance method of accounting for uncollectible receivables method was u

Question

If the allowance method of accounting for uncollectible receivables method was used and an estimate was made at year end, Dec.31 ........what general ledger accounts are debited and credited in JANUARY when a particular customer's account is identified as uncollectible?

  

debit Allowance for Bad Debts; credit Accounts Receivable

  

debit Bad Debts Expense; credit Accounts Receivable

  

debit Bad Debts Expense; credit Allowance for Bad Debts

debit Bad Debts Expense; credit Allowance for Bad Debts: incorrect.

  

debit Accounts Receivable; credit Allowance for Bad Debts

Explanation / Answer

coreect Answer is :debit Allowance for Bad Debts; credit Accounts Receivable

Under the allowance method, if a specific customer's accounts receivable is identified as uncollectible, it is written off by removing the amount from Accounts Receivable. The entry to write off a bad account affects only balance sheetaccounts: 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

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