Question

What is the normal journal entry for recording bad debt expense under the allowance method?

a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.

b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.

c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.

d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

Answer 1

c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.

Step-by-step explanation:

A firm records normal journal entry for the purpose of recording the losses that will incurred by it as the result of the credit sales made by it to the customers. This method for recording bad debt expense is known as allowance method.

In allowance method, the journal entry for recording bad debt expense is Debiting the Bad Debts Expense, which will increase the operating expense in income statement and Crediting the Allowance for Doubtful Accounts, which will decrease the Accounts receivable balance in balance sheet.

Based on the above discussion, the answer shall be.

c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.