Bad Debt Bookkeeping Question

Bad Debt

Bad Debt

Where do you record bad debt? What is the proper accounting treatment for uncollectible accounts?


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Jul 17, 2023
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starstarstarstarstar 		Write Off as Bad Debt
by: BB

When dealing with bad debt, it is important to record it in the appropriate accounts on your financial statements. Specifically, bad debt is typically recorded as an expense in the income statement, reducing your net income.

Simultaneously, the amount of the uncollectible accounts is also deducted from the accounts receivable balance in the balance sheet, reflecting the reduced value of outstanding receivables.

This accounting treatment allows for a more accurate representation of your financial position and helps you assess the true value of your accounts receivable.

Consult with a professional bookkeeping services company to ensure proper recording and treatment of bad debt in your specific financial context.
Jun 11, 2018
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starstarstarstarstar 		Bad Debt Bookkeeping Answer
by: Stephanie

Hello,

Thank you for your question.

Bad debt is recorded on the Profit and Loss statement as an expense under Bad Debt Expense or Write-Offs.

However; Bad Debt is only recorded as an expense if the income was already recorded.

This typically only would happen if you are an accrual basis company and recorded the income when incurred as opposed to a cash basis company who records income when received.

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Bad Debt

by Lisa
(SC USA)

Bad Debt

Bad Debt

Our business makes the following entry when a sponsorship is agreed upon. We debit Accounts Receivable and credit Deferred Revenue Sponsorships.

I have an account that is uncollectable. I have made an entry to debit Bad Debt and credit Accounts Receivable. I need a debit to clear the Deferred Revenue. What is the offsetting credit?

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Jul 17, 2023
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starstarstarstarstar 		Charge Off as Bad Debt
by: Stephanie

The offsetting credit for clearing the Deferred Revenue in this scenario would typically be credited to the Revenue or Income account associated with the sponsorship.

This entry would reflect the reversal of the previously recognized revenue that was initially deferred.

By debiting Bad Debt and crediting Accounts Receivable, you have already accounted for the uncollectible amount.

Clearing the Deferred Revenue account with a credit to the Revenue or Income account ensures that the financial statements accurately reflect the adjusted revenue recognition due to the uncollectable sponsorship.

It is recommended to consult with a professional bookkeeping services company to ensure proper recording and treatment of the transaction in your specific financial context.

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What is a Bad Debt?

What is a Bad Debt

What is a Bad Debt

What exactly is a bad debt, or uncollectible account? And how do you do the bookkeeping for it?

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Jul 18, 2023
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starstarstarstarstar 		Dealing With Bad Debt
by: Stephanie

When dealing with bad debt, it is important to record it in the appropriate accounts on your financial statements.

Specifically, bad debt is typically recorded as an expense in the income statement, reducing your net income.

Simultaneously, the amount of the uncollectible accounts is also deducted from the accounts receivable balance in the balance sheet, reflecting the reduced value of outstanding receivables.

This accounting treatment allows for a more accurate representation of your financial position and helps you assess the true value of your accounts receivable.

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