Question

How do you reinstate an uncollectible recievable account using the allowance method?

Answer 1

To reinstate an uncollectible receivable account using the allowance method, reverse the write-off by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable, then record the received payment by debiting Cash and crediting Accounts Receivable.

Step-by-step explanation:

To reinstate an uncollectible receivable using the allowance method, follow these two primary steps:

1. Reverse the write-off entry by debiting the Allowance for Doubtful Accounts and crediting the Accounts Receivable for the amount previously written off. This action restores the customer’s account.
2. Record the collection of the receivable by debiting Cash and crediting Accounts Receivable for the amount collected. This entry reflects the receipt of the payment from the customer.

It's important that these transactions are documented accurately to maintain the integrity of the financial statements. The allowance method helps companies anticipate their losses due to uncollectible accounts, and reinstating a receivable indicates recovery of an amount that was previously deemed noncollectible.