End of the Year Adjustments for Allowance for Doubtful Accounts

Step-by-Step Instructions
1. Start with the end of the year balances for both Allowance for Doubtful Accounts and
Accounts Receivable
12/31

Accounts Receivable
156,000

12/31 Bal.

Allowance for Doubtful Accounts

6,500
12/31

156,000

2. The ending balance will be either giving or it will be a percentage of the Accounts
Receivable ending balance.
i.e. 6% (156,000 X .06) of Accounts Receivable. Or 9,360 (This is not the
answer!) This is only the amount desired for the beginning balance of the
following year.

Accounts Receivable
12/31
156,000

12/31 Bal.

Allowance for Doubtful Accounts

12/31
6,500
2,860 12/31 Adj.

156,000

9,360

12/31Bal.

3. Now subtract the beginning balance in the Allowance for Doubtful Accounts from the
ending desired balance.
i.e. 9,360 6500 = 2,860 this will give you the amount to increase the Allowance
for Doubtful Accounts. Now you can prepare the journal entry.

Date
12/31

Account Title and Description

Bad Debt Expense
Allowance for Doubtful Accounts
Adjustment of allowance account to new begin. bal.

MJC Revised 1-2016

Debit
2,860

Credit
2,860

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