A company's estimation of bad debt expense for the period involves two general ledger accounts -- "bad debt," an expense account, and "allowance for doubtful accounts," a contra-asset account used to offset to the accounts receivable balance. The journal entry to estimate and record bad debt using either will result in a debit to bad debt expense and a credit to allowance for doubtful accounts.
When a company decides to write off an account payable owed it as bad debt, it creates a bad debt expense. This, in turn, creates an entry in a balance sheet account (contra asset account) called allowance for doubtful accounts,
Apr 5th, 2015
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