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. The adjusting entry (in 1) reduces Net Income as well as Net Accounts Receivable. The write-off (in 2) has offsetting effects on Accounts Receivable and the Allowance for Doubtful Accounts, ultimately yielding no net effect on Net Accounts Receivable or on Net Income. Write Off Specific Customer Balances 800 Allowance for Doubtful Accounts Accounts Receivable 800 The related estimated Bad Debt Expense was recorded in the period of the sale Allowance for Doubtful Accounts Accounts Receivable Credit Sales Collections Write ON! Accounts Recognize Bad Debt Expense Write On Accounts Knowledge Check 01 Bellows Company uses the allowance method to account for uncollectible accounts. After making a concerted effort, Bellows' management determined that it will not be able to collect the $1,200 owed to it by its customer Acme Inc. Prepare the appropriate journal entry to record the receivable write-off. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the write off from accounts receivable. Note: Enter debits before credits. Transaction General Journal Debit Credit A