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 |