Question

At the end of 2020, Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2021, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off.

Answer 1

Allowance for doubtful debt Dr $6000

Account receivable Cr $6000

Step-by-step explanation:

The entry for recording receivable and creating an allowance for doubtful debt is;

Account receivable Dr $800000

Allowance for doubtful debt Cr $800000

Account receivable is an asset account and allowance for doubtful debt is a contra account meant to decrease/reduce the receivable account. Therefore when a doubtful debt is confirmed to be not received, bad debt expense is charged to the Profit & loss account and the above entry is reversed to reflect it's impact.

The entry to write-off the receivable from Ramirez company is;

Allowance for doubtful debt Dr $6000

Account receivable Cr $6000