@stoleway I hear you on the note receivables (ugh). I try to think of them like bonds which make more sense to me and hopefully you. But, regarding AR and AFDA (Accounts Receivable and Allowance for Doubtful Accounts) it depends which method you're using. I've outlined it below and hope it helps!
Percentage of Sales:
-If you take a percentage of sales approach (think credit sales) you will take the % of of credits sales estimated to be uncollectable and multiply it by credit sales. This amount will be you Bad Debt Expense. The JE is:
Dr. Bad Debt Expense
Cr. AFDA
*Note the balance in any AFDA account is ignored, you just increase the AFDA account and the offset to Bad Debt Expense based on the above % x credit sales = bad debt expense. AFDA is a balance sheet account so it will carry forward to the next period. It's a contra-asset account so AR on the financials will be presented ‘net' of AFDA.
Percentage of Receivables Method
-If you take the percentage of receivables method this is where you use AR aging. This practice is most often used. If a problem says 2% of outstanding AR over 60 days is uncollectable and the balance in the over 60 day ‘bucket' of AR is $1,000 you would book:
Dr. Bad Debt Expense for 20
Cr. AFDA 20
The entry above is reducing AR using AFDA as a contra-asset account. It is not writing off the AR from the records. Let's say you had an invoice for $17 that you determined was uncollectable then you would write off that AR:
Dr. AFDA 17
Cr. AR 17
The debit to AFDA allows you do credit the AR off your records.
Recovery
-Let's say you wrote that $17 AR and your customer says they'll actually pay you. Well gosh darn it, you wrote it off! No worries, you'll just reinstate AR and then collect as normal =)
Dr. AR 17
Cr. AFDA 17
Dr. Cash 17
Cr. AR 17
The AFDA is a balance sheet account so it's rolling. In the next period it will get adjusted as the aging and bad debt expense changes.
Just to note the Direct Write-off is NOT GAAP because it violates the matching principle. When you deem AR uncollectable you simply:
Dr. Bad Debt Expense
Cr. AR
.