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The allowance for receivable is creating by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts as shown below:                            Accounts Receivable a/c   XXX                                                                  Allowance for Doubtful Accounts a/c   XXX (Estimation for Uncollectible Accounts Is Created) Here is Allowance for doubtful accounts is a Contra asset Account as it is the reversal of accounts receivable. It is just an estimation to match Uncollectible Accounts Expense with the unpaid invoices of sales for the accounting period according to Matching Principle GAAP .

It is an Estimation either o n Sales (Income Statement-Approach) or  on Accounts Receivable  (Bala nce Sheet-Approach)  that some percentage of Accounts Receivable / Debtors or Sales may not be recovered from our customers in future. For More Details, You Ca n Study,  " How To Write Off An Uncollectible Accounts Receivable ". It is also called Provision for Doubtful Debts or Reserve For Doubtful Debts under British Accounting System. Do You K now  What Kind / Type of Account is Allowance For Doubtful Accounts? It is a Contra Asset Account which is deducted from the Closing Balance of Accounts Receivable on Balance Sheet . How To Calculate Allowance For Doubtful Accounts Or Estimated Bad Debts Expe nse / Doubtful Debts? For Example, if we sold goods to our Customers for Rs. 60000 on Credit Basis, then there are possibilities that some percentage of unpaid amount may not be recovered from Accounts Receivable, so as a precautiona...

Here we will study about Provision For Doubtful Debts Journal Entry or Allowance For Doubtful Accounts Journal Entry in Accounting. You may also be Interested In, “ What is A Debit Balance In Allowance For Doubtful Accounts ” What Are Allowance For Doubtful Accounts? Allowance for Doubtful Accounts are an estimation on the Total Debts Due From Customers ( Accounts Receivable ). There are chances that few percentage of total debts may not be recovered from our customers, so it is better to makes an Allowance or Estimation or Provision on Accounts Receivable in order to carry on the business in a safe way and avoid unavoidable loss to the business. Before Passing Accounting Journal Entry For Allowance For Doubtful Accounts, you must remember that: 1. While Making An Allowance on Accounts Receivable, The Accountant of the Company must consider Matching Principle of Accounting (GAAP) that revenues must be matche...