Question

Using the direct write-off method for handling bad debts, what would the journal entry be to write off a $650 account receivable that was deemed to be uncollectible?

Answer 1

Using the Direct Write-off method means that bad debts are removed from the Accounts Receivable as they occur instead of using an Allowance account.

Bad debts will be debited as this is an expense. Accounts Receivable will be credited to reflect that the account is reducing in value.

The relevant journal entry will therefore be;

DR Bed Debts $650

CR Accounts Receivable $650