Final answer:
Removing specific customer balances, also known as writing off customer balances, is a process in accounting where a company eliminates or reduces the amount owed by a particular customer.
Step-by-step explanation:
Removing specific customer balances, also known as writing off customer balances, is a process in accounting where a company eliminates or reduces the amount owed by a particular customer. It is done when it is unlikely that the customer will pay the outstanding balance. This is typically done by creating a journal entry to debit the customer's accounts receivable and credit the bad debt expense or allowance for doubtful accounts.
For example, let's say a company has a customer who has repeatedly failed to pay their invoices and has not made any payment for several months. To remove this customer's balance, the company would write off the amount owed by debiting the customer's accounts receivable and crediting the bad debt expense account.
It is important for companies to carefully consider and document decisions to write off customer balances to ensure accurate financial reporting.