Receivables and payables Updated November 2026

Writing off a receivable

To write off a customer account that will not be collected, debit Allowance for Doubtful Accounts and credit Accounts Receivable for that customer's balance (allowance method). Under the direct write-off method, debit Bad Debt Expense instead. If the customer later pays, reverse the write-off and record the cash receipt.

Syntax

Allowance method: Dr Allowance for Doubtful Accounts / Cr Accounts Receivable; Direct method: Dr Bad Debt Expense / Cr Accounts Receivable

Part	What it is
`Allowance for Doubtful Accounts`	Debited for the write-off; the estimate already carried the expense.
`Accounts Receivable (customer)`	Credited to remove the specific balance from the ledger and the subsidiary ledger.
`Bad Debt Expense`	Debited only under the direct write-off method.

Examples

Dr Allowance for Doubtful Accounts 800 / Cr Accounts Receivable, J. Smith 800

Result: Net receivables unchanged; no effect on net income

Allowance method: Smith's 800 account is declared uncollectible.

Dr Bad Debt Expense 800 / Cr Accounts Receivable, J. Smith 800

Result: Expense 800 in the period of the write-off

Direct write-off method, allowed only when amounts are immaterial or for tax purposes.

Recovery: Dr Accounts Receivable, J. Smith 800 / Cr Allowance for Doubtful Accounts 800; then Dr Cash 800 / Cr Accounts Receivable, J. Smith 800

Result: Allowance restored, cash collected

Reinstating keeps the customer's payment history complete.

Common mistakes

Debiting Bad Debt Expense under the allowance method: that doubles the expense, because the estimate already covered it.
Crediting Allowance for Doubtful Accounts on a write-off: the allowance is debited (used up), not credited.
Recording a recovery as a straight Dr Cash / Cr Allowance: reinstate the receivable first so the subsidiary ledger shows the collection.

Practice Writing off a receivable

These drills check your answer on live data, free, no account needed.

Writing off an accountBluewater Marine uses the allowance method. It learns that a customer, Reed Charters, has closed its business, and it writes off Reed's $1,275 account balance as uncollectible.
Recovery: reinstating the accountLast year Pinecrest Furniture wrote off a $640 account owed by Dana Vale. Dana has now contacted the company and promised to pay the full amount. Record only the entry that reinstates Dana's account; the cash collection will be recorded separately.

Questions

Does writing off a receivable affect net income?

Not under the allowance method, because the expense was recognized when the allowance was set up. Under the direct write-off method it does, in the period of the write-off.

When should an account be written off?

When there is specific evidence it will not be collected, such as bankruptcy, a returned collection file or a long-past-due balance with no response.

Allowance methodThe allowance method explained: estimate uncollectibles, record the allowance, write off specific accounts against it and reinstate recoveries.
Bad debt expenseHow to estimate and record bad debt expense: Dr Bad Debt Expense, Cr Allowance for Doubtful Accounts. Percent of credit sales versus aging of receivables.
Collecting a receivableHow to record a customer paying an invoice: debit Cash, credit Accounts Receivable. Partial payments, early-payment discounts and why there is no revenue.
Notes receivableHow to record a promissory note from a customer: Dr Notes Receivable, Cr Accounts Receivable; accrue interest income; collect at maturity; dishonored notes.