Q37. Accounts receivable
Entity A decided to write off $6,000 in accounts receivable that became uncollectible. Entity A uses the allowance method for bad debts and had $8,300 credit balance in the allowance for doubtful accounts.
Prepare a journal entry to record this transaction.
A37. When a portion of accounts receivable is written off, the balances of accounts receivable and the allowance for doubtful accounts decrease.
| Debit | Credit | |
| Allowance for doubtful accounts | 6,000 | |
| Accounts receivable | 6,000 |
[Note]
1. Decrease in allowance for doubtful accounts (contra-asset): debit
2. Decrease in accounts receivable (asset): credit
[Exercise]
Entity A later collected $1,000 from the accounts receivable that was previously written off.
(1) Journal entry to restore accounts receivable and the allowance for doubtful accounts.
| Debit | Credit | |
| Accounts receivable | 1,000 | |
| Allowance for doubtful accounts | 1,000 |
[Note]
1. Increase in accounts receivable (asset): debit
2. Increase in allowance for doubtful accounts (contra-asset): credit
3. When a portion of accounts receivable is collected after being written off, the balances of accounts receivable and the allowance for doubtful accounts are restored first.
4. Then, the collection of accounts receivable is recorded.
(2) Journal entry to record the collection of accounts receivable restored by previous journal entry.
| Debit | Credit | |
| Cash | 1,000 | |
| Accounts receivable | 1,000 |
[Note]
1. Increase in cash (asset): debit
2. Decrease in accounts receivable: credit