If you must DEBIT Allowance Account to reach aging target, do you CREDIT Bad Debt Expense??

Using the aging of receivables method, the target amount for Allowance for Uncollectible Accounts is $25,000. The current balance in the Allowance Account is $34,000. So to get to the target amount, we must debit the Allowance Account $8,000, right? Then what do we do with Bad Debt Expense, CREDIT it?

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Originally Posted by jeninmd

If you must DEBIT Allowance Account to reach aging target, do you CREDIT Bad Debt Expense???

Using the aging of receivables method, the target amount for Allowance for Uncollectible Accounts is $25,000. The current balance in the Allowance Account is $34,000. So to get to the target amount, we must debit the Allowance Account $8,000, right? Then what do we do with Bad Debt Expense, CREDIT it?

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According to the question, the allowance accounts shows a reduction of $9,000 (not $8,000). The credit will be to the bad debts recovered account in the income statement - if there are no actual bad debts in the year.

If there are actual bad debts, please charge the actual as:
Debit Allowance account
Credit Accounts Receivable

After this entry is made, please rework the balance in the allowance account and compare it with the allowance required. If the adjusted balance in the allowance account is more than the required balance, the credit is given to the bad debts recovered account. Conversely, if the adjusted balance is short, then debit goes to bad debts expense