Final answer:
To journalize an uncollectable receivable, debit Allowance for Doubtful Accounts and credit Accounts Receivable for the estimated uncollectable amount, showing the company does not expect to collect that receivable.
Step-by-step explanation:
To journalize an uncollectable receivable using the allowance for doubtful accounts, you would make an adjusting entry in the accounting records. This involves debiting the Allowance for Doubtful Accounts and crediting the Accounts Receivable with the amount considered to be uncollectable. Such an entry does not immediately affect the income statement, as the expense has been previously estimated and recorded in a prior period. Here is the journal entry you would typically use:
- Debit: Allowance for Doubtful Accounts
- Credit: Accounts Receivable
This entry reduces Accounts Receivable and the allowance balance, reflecting that the company does not expect to collect the receivable. It is part of the method companies use to match expenses with revenues in the accounting period they are incurred, in accordance with the accrual basis of accounting and the matching principle.