Question

If an invoice becomes uncollectible you will need to write it off as a ___

Answer 1

When an invoice is uncollectible, it is written off as bad debt expense using either the direct write-off method or the allowance method, affecting the balance sheet and income statement.

Step-by-step explanation:

If an invoice becomes uncollectible, you will need to write it off as a bad debt expense. In accounting, this means you remove the invoice amount from accounts receivable on your balance sheet and record it as an expense on your income statement. This action reflects that the amount owed will not be paid and adjusts your financial records accordingly.

There are two methods to account for bad debts: the direct write-off method and the allowance method. Under the direct write-off method, a company writes off bad debt only after determining that the debt is uncollectible. The allowance method involves creating an estimated allowance for doubtful accounts in advance, which is subtracted from gross receivables to calculate net receivables on the balance sheet. When a specific invoice proves to be uncollectible, it is written off against this allowance.