At the end of the first year of operations, gaur manufacturing had gross accounts receivable of $363,000. gaur's management estimates that 9% of the accounts will prove uncollectible.
(dr) bad debt expense (363000 x .09) = 32670
(cr) allowance for uncollectible accounts 32670
Receivables, loans, or other debts that have almost no possibility of being paid are referred to as uncollectible accounts. A debt may become uncollectible for a number of reasons, such as the debtor's bankruptcy, an inability to locate the debtor, the debtor's fraud, or the absence of adequate evidence to support the existence of the debt.
The journal entry to write off an account that has been determined to be uncollectible for a particular customer is: A reduction in accounts payable (to remove the amount that will not be collected) An adjustment to the provision for doubtful accounts (to reduce the Allowance balance that was previously established)
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