Should the event arise that you consider a receivable uncollectable in full or in part, that is you consider that your customer considering the circumstances wont be able to pay what they owe, you either decide to write the receivable down in value to the amount they will be able to pay (that is you’re making an estimate) or off the balance sheet if you’ve determined that they cannot pay you anything.
The accounting entry means two things will be impacted – the receivable (asset on the balance sheet) and the income statement:
| # | Debit-Credit | Account name | Amount |
| 1 | Debit | Doubtful receivables expense | 1,000 |
| Credit | Allowance for doubtful receivables | 1,000 |
Effectively to write off a receivable from the balance sheet, you’d apply the same entry only that you’d do it in a full amount the receivable is recognized (that is you’d show the expenses in the full amount) in and take it off from the receivables ledger as well (so instead of creating this ‘Allowance for doubtful receivables’ account you’d simply derecognise the balance from within the ‘Accounts receivable’ account altogether).