The general journal entry to provide for estimated bad debts under the allowance method is:

Question

Quizplus · Accepted Answer

The allowance method requires an estimate of the amount of bad debt that will occur. This estimate is recorded through the use of an adjusting entry at the end of the accounting period. The adjusting entry under the allowance method debits bad debts expense and credits allowance for doubtful debts. This reflects the recognition of the estimated amount of bad debt as an expense for the period, and the establishment of a contra-asset account to reduce the reported amount of accounts receivable to its expected realizable value. Choice A is incorrect because it reverses the debit and credit, which would result in an incorrect representation of the allowance for doubtful debts. Choice C is incorrect because it incorrectly debits accounts receivable, rather than recognizing bad debt expense. Choice D is incorrect because it reverses the debit and credit, which would result in an erroneous amount of bad debt expense being recorded.

The General Journal Entry to Provide for Estimated Bad Debts