Introduction to Accounting for Accounts Receivable

Recording Accounts Receivable

  • Debit: An increase in accounts receivable is recorded with a debit entry, reflecting the amount owed by the customer.
  • Credit: A corresponding increase in revenue or sales is recorded with a credit entry, recognizing the income earned from the sale.

Monitoring and Tracking

Recording Bad Debts

  • Allowance for Doubtful Accounts: Companies create a contra-asset account called the allowance for doubtful accounts to reflect the estimated portion of accounts receivable that may not be collected.
  • Bad Debts Expense: Periodically, companies record an adjusting entry to recognize bad debts expense, reflecting the portion of accounts receivable expected to be uncollectible based on the allowance for doubtful accounts.

Reporting Accounts Receivable


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