There are two methods for writing off the accounts receivable. One of them is bad debt direct method. Under this, accountant does not take support from any estimate and as a result, the bad debt expense entry is passed only when the bad debt actually gets confirmed. In this method, no allowance for doubtful account is maintained in the accounting records.
The drawback of this method is that it violates the matching concept of accounting. Because when the entity is making the sale, an expense item must be matched based over the estimation criteria. US GAAP does not allow the use of direct write-off method of bad debts.
|Bad debt expense||ABC|
|Allowance for doubtful debt||ABC|