October 30, 2016 admin

Bad Debts

Expenses

BAD DEBTS EXPENSE ACCOUNT
8700/8705/8726

ACCOUNT EXPLANATION
Provision for estimated or actual losses from uncollectible accounts and notes receivable.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Monthly adjustment of allowance for doubtful notes and accounts SE
    Bad Debts 8700
    Bad Debts—Service—QL/FL/QCSC 8705
    Bad Debts—Parts—QL/FL/QCSC 8726
      Allowance for Doubtful Receivables 1290
             
  Write-off of uncollectible P, S & B accounts receivable G
    Allowance for Doubtful Receivables 1290
      Accounts Receivable—Parts 1120
      Accounts Receivable—Service     1121
      Accounts Receivable—Body Shop     1122
             
  Collection by agency of account previously written off CR
    Cash in Bank—General 1001
    Professional & Service Fees 8660
    Professional & Service Fees—Service—QL/FL/QCSC 8665
    Professional & Service Fees—Parts—QL/FL/QCSC 8706
      Allowance for Doubtful Receivables 1290
COMMENTS
  • As noted in the comments on Account 1290, Allowance for Doubtful Receivables, dealerships may record bad debts on the basis of either the allowance method, which is recommended, or the direct write-off method. If the latter method is used, collections of accounts previously written off should be credited to Account 8700.
  • Write-off of uncollectible receivables should have prior approval of appropriate dealership management.
  • Receivables written off as uncollectible should be transferred from the subsidiary ledger to a memorandum collection ledger for further collection effort.
  • For departmentalization purposes, bad debts expense should be distributed to the operating department that received credit for the applicable sale. See Departmentalization for further information.