Where an allowance for doubtful debts account is maintained,the accounting entry to write off a bad debt is:
A) debit bad debts; credit accounts receivable
B) debit allowance for doubtful debts; credit accounts receivable
C) debit doubtful debts expense; credit accounts receivable
D) none of the above

Question

Quizplus · Accepted Answer

When an allowance for doubtful debts account is maintained, it means that a provision has already been made for potential bad debts. Therefore, the write-off of a bad debt would involve reducing the allowance account and also reducing the accounts receivable. Hence, we need to debit the allowance for doubtful debts account (as it represents the provision made for bad debts), and credit the accounts receivable account (as the debt has become irrecoverable). Option A is incorrect because it implies that bad debts are not already provided for in the accounts, which is not the case. Option C is incorrect because doubtful debts expense is typically used when there is no allowance account maintained, and it represents the entire cost of bad debts. Option D is incorrect as there is a correct answer.

Where an Allowance for Doubtful Debts Account Is Maintained,the Accounting