Bad debt may be estimated on the edning balance of the accounts receivable. The another method is estimated based on credit sales method. At the end of the period, entity apply certain {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c} on the ending balance of the accounts receivable and then adjust this balance with any balance in allowance for doubtful debt account.
Formula
Bad debt expense = Ending balance of Allowance for doubtful debt – credit balance of allowance for doubtful debt
Or,
Bad debt expense = Ending balance of Allowance for doubtful debt – debit balance of allowance for doubtful debt
After estimating the closing figure, the following journal entry is passed in the ledgers:
| Debit | Credit | |
| Bad debt expense | abc | |
| Allowance for doubtful debt | abc |