When a specific bad debt is written off under the allowance method, what is the entry?

When a specific bad debt is written off under the allowance method, what is the entry?

• A. Debit Bad Debt Expense; Credit Accounts Receivable.
• B. Debit Allowance for Doubtful Accounts; Credit Accounts Receivable.
• C. Debit Accounts Receivable; Credit Bad Debt Expense.
• D. Debit Cash; Credit Allowance for Doubtful Accounts.

Answer: (B)

Under the allowance method, estimated uncollectibles are tracked in a contra-asset account (Allowance for Doubtful Accounts). When a specific receivable is actually uncollectible, you remove it from Accounts Receivable and reduce the allowance, not recognize a new expense. The correct journal entry is to Debit Allowance for Doubtful Accounts and Credit Accounts Receivable. This write-off lowers both the AR and the allowance by the same amount, leaving net realizable value unchanged and avoiding a new expense in that period. Debiting Bad Debt Expense would recognize a cost at write-off, which isn’t how the allowance method operates. Debiting Accounts Receivable or debiting cash would be incorrect in this context.

Under the allowance method, estimated uncollectibles are tracked in a contra-asset account (Allowance for Doubtful Accounts). When a specific receivable is actually uncollectible, you remove it from Accounts Receivable and reduce the allowance, not recognize a new expense. The correct journal entry is to Debit Allowance for Doubtful Accounts and Credit Accounts Receivable. This write-off lowers both the AR and the allowance by the same amount, leaving net realizable value unchanged and avoiding a new expense in that period. Debiting Bad Debt Expense would recognize a cost at write-off, which isn’t how the allowance method operates. Debiting Accounts Receivable or debiting cash would be incorrect in this context.