Record the journal entry by debiting bad debt expense and crediting allowance for doubtful accounts. When you decide to write off an account, debit allowance for doubtful accounts. The amount represents the value of accounts receivable that a company does not expect to receive payment for.

How do you write-off using the allowance method?

The entry to write off a bad account affects only balance sheet accounts: a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. No expense or loss is reported on the income statement because this write-off is “covered” under the earlier adjusting entries for estimated bad debts expense.

Which is better direct write-off or allowance method?

Based on generally accepted accounting principles, the allowance method is preferred over the direct method, because it better matches expenses with sales of the same period and properly states the value for accounts receivable.