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Treatment of Bad Debt expense

Sufyan Alvi's Profile

Hi,

I want to ask that when we collect previously written-off receivable, we make entry of

Dr Cash
Cr Allowance for Doubtful Debts.

And, earlier we had already passed an entry of

Dr Bad Debt Expense
Cr Allowance for Doubtful Debts

In the above case, we put the bad debt in allowance account earlier which we later written off as well. However, after some time we received the receivable. In this case, why dont we reverse the expense which we charged off and Dr the allowance for doubtful debts because we have already collected the receivable for which we recorded an allowance.

Appreciate any response on this.

Answers

Amit Kumar Saxena
Title: Financial Analyst
Company: Bright Investment Company Limited
(Financial Analyst, Bright Investment Company Limited) |

In Previously write off : One entry must be passed earlier

Dr Allowance for Doubtful Debts
Cr Accounts Receivable

that is why we make :

when we collect previously written-off receivable, we make entry of

Dr Cash
Cr Allowance for Doubtful Debts.

Since as per GAAP, No direct write off is allowed.

hope this is clear now...

any comments by others then please share

thanks

Brett Bauer
Title: Audit Manager
Company: Atkinson & Company, Ltd.
(Audit Manager, Atkinson & Company, Ltd.) |
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