When the account Allowance for Uncollectible Accounts is reported on the balance sheet, the company anticipates that some of its accounts receivable will not be collected. In other words, without knowing specifically which account will not be collected, the company debits Bad Debt Expense and credits Allowance for Uncollectible Accounts. This results in an expense on the income statement (sooner than would occur under the direct write-off method) and a reduction of the current assets on the balance sheet. (When an account is written off under the "allowance" method, the entry will be a debit to Allowance for Uncollectible Accounts and a credit to Accounts Receivable.)
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