Using the allowance method for bad debts,the end of the period adjusting entry for estimated bad debts is:

Question

Quizplus · Accepted Answer

The allowance method involves establishing an estimated amount of bad debts and creating a contra asset account (Allowance for Doubtful Accounts) to reduce the balance of Accounts Receivable. At the end of the period, the estimated bad debts need to be adjusted by recording a debit to Bad Debts Expense and a credit to the Allowance for Doubtful Accounts. This reflects the recognition that some of the Accounts Receivable may never be collected and recognizes the related expense in the period it is incurred. Option E reflects this end-of-period adjusting entry correctly.

Using the Allowance Method for Bad Debts,the End of the Period