What Is The Normal Journal Entry When Writing-off An Account As Uncollectible Under The Allowance Method?

Multiple Choice Question | What Is The Normal Journal Entry When Writing-Off An Account As Uncollectible Under The Allowance Method?

The correct answer of this multiple choice question (MCQ) is (b) "Debit Allowance for Doubtful Accounts, credit Accounts Receivable", as to write off uncollectible accounts (Accounts Receivable), we credit it, which has normal debit balance, and debit Allowance For Doubtful Accounts, which has normal credit balance.

Initially, we estimate, under allowance approach, that a percentage of sales or accounts receivable is not collected, so we debit uncollectible expense accounts / doubtful debts and credit allowance for doubtful accounts, which is a contra asset account. When it is clear that a percentage of sales or accounts receivable becomes uncollectible then we write off accounts receivable and allowance for doubtful accounts equal to the amount of uncollectible.