The contra-account, Allowance for Doubtful Accounts, is credited when journal entries are made for estimates of bad debts.

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The contra-account, Allowance for Doubtful Accounts, is credited when journal entries are made for estimates of bad debts. This is because the allowance account is used to offset the Accounts Receivable account which is debited when sales are made. By crediting the allowance account, we are reducing the amount of Accounts Receivable that we expect will be collectible. This approach is based on the matching principle of accounting, which requires that expenses be recognized in the same accounting period as the revenues that they helped to generate.

The Contra-Account, Allowance for Doubtful Accounts, Is Credited When Journal