How to Adjust an Entry for Bad Debt Write-Offs
If you have been unsuccessful in collecting on past-due debt, you may be ready to write off the bad debt. You cannot simply erase the invoice from the debt. Instead adjustment entries must be made to account for the bad debt write-off. The accounts that need to be adjusted are the allowance for doubtful accounts and the accounts receivable accounts. If you are not comfortable making the adjustment, your accountant can do it for you.
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Instructions
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Launch your accounting software, if you are keeping your accounting records in software. If you are managing the business books by hand, get out your general ledger to prepare to make the adjustment.
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Create a debit memo to your "Allowance for Doubtful Accounts" account in the amount of the bad debt. Leave a note on the debit memo regarding the cause of the bad debt.
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Enter in a credit memo to your "Accounts Receivable" account in the amount of the bad debt. Leave a note on the credit memo regarding the cause of the bad debt. This final memo balances your books and completes the bad debt write-off.
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