What does it mean to write off an uncollectible account?
Also question is, how do you write off an uncollectible account?
When a specific customer's account is identified as uncollectible, the journal entry to write off the account is:
- A credit to Accounts Receivable (to remove the amount that will not be collected)
- A debit to Allowance for Doubtful Accounts (to reduce the Allowance balance that was previously established)
Likewise, what is the effect of writing off an uncollectible account? Uncollectible Bad Debt The effect of writing off a specific account receivable is that it will increase expenses on the profit/loss side of things, but will also decrease accounts receivable by the same amount on the balance sheet.
Correspondingly, what does it mean to write off an account?
A write-off is a reduction of the recognized value of something. In accounting, this is a recognition of the reduced or zero value of an asset. In income tax statements, this is a reduction of taxable income, as a recognition of certain expenses required to produce the income.
Is uncollectible accounts a debit or credit?
Inasmuch as it usually has a credit balance, as opposed to most assets with debit balances, the allowance for uncollectible accounts is called a contra asset account. It is important to note why companies use the allowance for uncollectible accounts rather than simply using accounts receivable.