Accounting and Finance for Lawyers

Receivable


To match the expected bad debt of accounts receivable, a contra account for such allowance should be created.

When debts actually become bad, the contra account is closed and removed from the Accounts Receivable account.

Example
Account Debit Credit
Accounts Receivable 100000
Fee Revenue 100000
     
Uncollectible Accounts Expense 4000
Allowance for Doubtful Accounts 4000
     
Allowance for Doubtful Accounts 4000
Accounts Receivable 4000