What is the allowance for doubtful accounts?

The allowance for doubtful accounts is a contra-asset account that is associated with accounts receivable and serves to reflect the true value of accounts receivable. The amount represents the estimated value of accounts receivable that a company does not expect to receive payment for.

How to make a journal entry for allowance for doubtful accounts?

Hence, the allowance for doubtful accounts increase by $390 ($890 – $500) during the accounting period. In this case, we can make the journal entry for allowance for doubtful accounts by debiting the increase of $390 into the bad debt expense and crediting the same amount into the allowance for doubtful accounts as below:

When should we record allowance for doubtful accounts?

In this case, we need to make the journal entry for allowance for doubtful accounts at the end of each accounting period in order to account for the expected loss. At the end of each accounting period, we need to record the expected losses due to uncollectible accounts into the allowance for doubtful accounts on the balance sheet.