Writing Off and Recovering Receivables
Accounting for Uncollectible Accounts
When a specific customer's account is determined to be uncollectible, the account is written off against the allowance account. If payment is later received, the write-off is first reversed before recording the cash collection.
- Write-offs do not create additional bad debt expense.
- Allowance decreases when accounts are written off.
- Recoveries require reversing the previous write-off.
- Cash collection is recorded after reinstating the receivable.
Note
The allowance method prevents write-offs from affecting current-period earnings because the expense was previously estimated.
Summary
Writing off receivables removes uncollectible accounts without creating new bad debt expense.