Accounts Written OffDefined with Examples
What are Accounts Written Off?
Accounts written off are typically accounts receivable accounts that are considered uncollectible and have been removed from the receivable account of the business’s general ledger.
After doing this, the company’s accounts receivable report will only list the customer invoices that the company expects to collect.
Businesses write off accounts by debiting the bad debt expense account or allowance for doubtful accounts and crediting accounts receivable.
Accounts Written Off Example
The owner of Opal’s Custom Bears and Dolls noticed she had an invoice from a customer that she no longer believed she would be able to collect.
Therefore, she decided to issue a credit memo that would offset the invoice and remove it from the receivable account.
She also debits the allowance for doubtful accounts, which will lower this account by the same amount.