[YL84]

Hello everyone,

I am in need of advice. Here is my current situation. I need help at work. I have been looking online but I couldn’t find anything. We booked estimated Bad Debt Expense in December 2017 as followed.

Dr. Bad Debt Expense 3,000
Cr. Allowance for Bad Debt 3,000

Now, we roll up into the new year 2018 and there has been no bad debt expense. The bad debt expense account is now $0. If we want to reverse last year bad debt expense because it can be recovered, do I book a credit to Bad Debt Expense?

Dr. Allowance for Bad Debt 3,000
Cr. Bad Debt Expense 3,000

However, by booking this JE, it means that my Bad Debt Expense account has a credit balance. It doesn’t look right on the income statement to have a negative bad debt expense. Could anyone help me with this JE? My boss wants me to provide an answer in the next 2 days. Please help. I appreciate if you could provide me the source online since I need to show to my boss how I come up with this answer.

THANK YOU SO MUCH!

[Lara]

Dr Allow for Bad Debt
Cr Bad Debts Recovered (an income account)

Bad debts journal entry

[Missy]

Look at your current receivables and estimate how much will ultimately be a bad debt. Book the difference to increase or decrease the allowance on the balance sheet and if the difference is a credit balance in your bad debt expense for 2018 it is what it is.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[LongShot]

Do what Lara said, just credit a recovery account. We did that all the time at the bank with loan charge offs and recoveries.

FAR - 75
AUD - 72; 87
REG - 64; 74; 84
BEC - 88

Done!!

[Author]

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