[Q1] The entity estimates that $2,000 of its accounts receivable may be uncollectible.
Prepare a journal entry to record this transaction.
[Journal Entry]
| Debit | Credit | |
| Bad debts expense | 2,000 | |
| Allowance for doubtful accounts | 2,000 |
[Notes]
Debit: Increase in bad debts expeense
Credit: Increase in allowance for doubtful accounts
The estimated amount of accounts receivable that is expected to be uncollectible is recorded in the allowance for doubtful accounts.
This method is called as an allowance method.