In this module, you will learn how to estimate and report the effects of uncollectible accounts. Under Generally Accepted Accounting Principles, or GAAP companies must use the allowance method to account for uncollectibles. This method involves the following steps:

1. Estimate and record uncollectibles with an end-of-period adjusting journal entry that increases Bad Debt Expense (debit) and increases the Allowance for Doubtful Accounts (credit).
2. Identify and write off specific customer balances in the period that they are determined to be uncollectible.