Bad Debt and Allowance for Doubtful Accounts
An allowance for doubtful accounts is an allowance for bad debt that decreases accounts receivable on a companys balance sheet. A month later ABC knows that a 1500 invoice is indeed a bad debt. Allowance For Doubtful Accounts Meaning Accounting Methods And More Bookkeeping Business Accounting Education Learn Accounting After this entry is recorded the companys income statement for the month of January will report Bad Debts Expense of 1000 and its January 31 balance sheet will report a credit. . The Allowance for Doubtful Accounts is a Contra account. It creates a credit memo for 1500 which reduces the accounts receivable account by 1500 and the allowance for doubtful accounts by 1500. For example if 3 of your sales were uncollectible set aside 3 of your sales in your ADA account. It records the 1 of projected bad debts as a 100000 debit to the Bad Debt Expense account and a 100000 credit to the Allowance for Doubtful Accou
