crazyitalian143
Apr 16, 2007, 07:06 AM
On dec 31st company determines that bad debts are expected to total $2000. Need journal entry
goldenbutterfly
Apr 16, 2007, 07:12 AM
You have to try to answer first.:)
goldenbutterfly
Apr 16, 2007, 07:23 AM
Ok, I hope you should try harder though... In crediting capital, you are adding to it 2000 which does not make any sense.
dr. Bad Debts Expense 2000
Cr. Allowance for Doubtful Accounts 2000
You credit allowance for doubtful accounts since 2,000 is only an estimate of bad debts, meaning it is still uncertain. It becomes a contra-asset to the Accounts Receivable.