Uncollectible accounts expense is debited, and the allowance is credited.
The allowance is a buffer to absorb defaults. If the allowance is too high, the journal entry to increase the allowance is reversed. In other words, a debit to the allowance, and a credit to the uncollectible accounts expense. The reversal increases net income (as expenses are reduced).
If you started the period with 10,000 in A/R with a 1,000 allowance for bad debts (10%) and then determined that 5% was an adequate allowance but A/R at the end of the period was 50,000, you would still have to increase your allowance by 1,500 to a balance of 2,500.
Yes allowance for doubtful accounts is shown in balance sheet
Recording an allowance for doubtful accounts can vary depending on the chart of accounts for the specific place of business. Usually to record an allowance for a doubtful account is to debit revenue and credit the write off account.
The allowance for doubtful accounts is a reduction to the accounts receivable. This is a contra account, similar to accumulated depreciation.
Credit
To make sure we don't run out of money for continuing operations in the event that doubtful accounts do not pay.
It is basically deducting the allowance for doubtful accounts from the total accounts receivable.
Prior to the closing of financial year
Allowance for doubtful accounts
What kind of an account (asset, liability, etc.) is Allowance for Doubtful Accounts, and is its normal balance a debit or a credit?
Allowance Method
current asset