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Accounting for irrecoverable debts and allowances for receivables

3.2 Increases and decreases to the allowance for receivables

The accounting entry required to increase an allowance are as follows:

Debit Irrecoverable debts expense account

Credit Allowance for receivables account

The accounting entry required to decrease an allowance are as follows:

Debit Allowance for receivables account

Credit Irrecoverable debts expense account

It is important to remember that it is only the movement on the
allowance account that is transferred to the irrecoverable debts
expense account.

Always remember to write off all irrecoverable debts before the
allowance for receivables is calculated and accounted for.

Illustrations and further practice

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