Bad Debts - How is bad debt treated?

Q: How is bad debt treated?

There are two ways to record a bad debt, which are: Direct write-off method. If you only reduce accounts receivable when there is a specific, recognizable bad debt, then debit the Bad Debt expense for the amount of the write off, and credit the accounts receivable asset account for the same amount. Allowance method.

Answer

Two methods exist for documenting bad debts: The direct write-off technique! You should credit the accounts receivable asset account with the same amount as debited from the Bad Debt expense if you only lower accounts receivable when there is a particular, identifiable bad debt. System of allowances.

Bad Debts - How is bad debt treated?

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