The journal entry to write off an account
Under the allowance method, writing off an uncollectible account is a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. No new expense hits the income statement at the moment of the write-off. Under the direct write-off method, the entry is a debit to Bad Debt Expense and a credit to Accounts Receivable. For federal income tax, a business bad debt is deductible when it becomes worthless, and the amount must previously have been included in income (IRS Tax Topic 453, IRS Tax Topic 453).
The two methods answer the same operating event, a specific customer balance that will not be collected, with different debits. The examples later on this page use illustrative dollars. They are not a company's books and they are not a result from practice.
| Debit | Credit | |
|---|---|---|
| Allowance method | Allowance for doubtful accounts | Accounts receivable |
| Direct write-off method | Bad debt expense | Accounts receivable |
Allowance method
The allowance method records the expense when the loss is estimated, then uses that allowance when a specific account is written off. The estimate and the write-off are two different entries.
Step 1: estimate and record the allowance
Debit Bad Debt Expense. Credit Allowance for Doubtful Accounts. This is the adjusting entry that puts the estimate on the books. It reduces income in the period of the estimate. The allowance is a contra-asset, so it reduces net receivables on the balance sheet. It does not remove a named customer yet.
Step 2: write off the specific account
Debit Allowance for Doubtful Accounts. Credit Accounts Receivable. The customer is now written off. Bad debt expense does not move again. The allowance goes down, and gross accounts receivable goes down, by the same amount.
Effect on net accounts receivable
Net accounts receivable is gross accounts receivable minus the allowance. Step 2 reduces both the gross asset and the allowance, so net receivables do not change at the write-off. The reduction in net receivables happened at step 1, when the expense and the allowance were recorded. The arithmetic is on the calculate accounts receivable page, and the estimate itself is the provision for credit losses.
Direct write-off method
The direct write-off method waits until a specific account is uncollectible and records the expense then.
The entry
Debit Bad Debt Expense. Credit Accounts Receivable. There is no allowance account in this entry. The expense and the removal of the receivable happen together. Net receivables fall at the write-off, because there is no earlier allowance to absorb it.
When it is used
Which method a business uses depends on the reporting framework that applies to it. Check that framework before choosing a method. This page does not cite a specific accounting-standards codification.
Is a write-off an expense? Is it an adjusting entry?
Under the allowance method, the expense was recorded when the allowance was estimated. That estimate is the adjusting entry. The later write-off of a named account is not a new expense, and it is not a second adjusting entry to bad debt expense. Under the direct method, the write-off itself is the expense. People searching "is a write off an expense" are usually colliding those two timings. The debit account tells you which timing you are in.
Recovering a written-off account
Cash that arrives after a write-off has to be recorded in two steps, so the receivable exists again for a moment and the cash is then applied to it.
Reinstate, then record the cash
Under the allowance method, reinstate the account with a debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. Then record the cash with a debit to Cash and a credit to Accounts Receivable. The first entry puts the customer back on the books against the allowance. The second entry collects it. Skipping the reinstatement and debiting cash straight to income would not show that the written-off account was the source of the cash.
Write-off vs charge-off
A write-off, on this page, is the journal entry that removes a receivable the business no longer expects to collect. A charge-off is the related credit-reporting and lending word for recognizing that a loan or account is a loss. They meet in the same economic event, and they are not interchangeable labels. A bank charge-off has its own accounting and tax consequences, covered in charge-off accounting and tax recovery and the charge-off event. The ratio after recoveries is net charge-off.
Tax treatment of bad debts
Book accounting and the federal tax deduction are different questions. The journal entries above are bookkeeping. The deduction is Tax Topic 453.
Business bad debts, worthlessness, and collection steps
IRS Tax Topic 453 says a business bad debt is deductible when it becomes wholly or partially worthless, and that the amount must have been included in income or represent a loan of cash or something else of value (IRS Tax Topic 453). The topic also describes the need to show that reasonable steps were taken to collect the debt (IRS Tax Topic 453). Nonbusiness bad debts are treated separately on the same IRS page, as short-term capital losses, and this page does not restate that rule beyond pointing at Topic 453. Read the topic before taking a deduction. Nothing here is tax advice.
Worked example
Illustrative dollars only. A business estimates $5,000 of losses and later writes off one customer for $1,200, then collects $200 of that write-off.
- Estimate: debit Bad Debt Expense $5,000, credit Allowance for Doubtful Accounts $5,000.
- Write off the customer: debit Allowance for Doubtful Accounts $1,200, credit Accounts Receivable $1,200. Bad debt expense stays $5,000.
- Recovery: debit Accounts Receivable $200, credit Allowance for Doubtful Accounts $200. Then debit Cash $200, credit Accounts Receivable $200.
Gross receivables and the allowance both fall by $1,200 at the write-off, so net receivables do not change at that step. The direct-method version of step 2 would have been debit Bad Debt Expense $1,200, credit Accounts Receivable $1,200, with no allowance. Supporting records for either version include the accounts receivable balance and the aging report that showed the account was old. A reconciliation trail is discussed in the receivables reconciliation note. The wider shelf is the receivables and credit hub.
FAQ
What is the journal entry to write off accounts receivable?
Allowance method: debit Allowance for Doubtful Accounts, credit Accounts Receivable. Direct method: debit Bad Debt Expense, credit Accounts Receivable.
Is a write-off an expense?
Under the allowance method the expense was recorded when the loss was estimated. The write-off itself does not add expense. Under the direct method the write-off is the expense.
How do you record a recovery of a written-off account?
Reinstate the receivable against the allowance (debit Accounts Receivable, credit Allowance for Doubtful Accounts), then record the cash receipt (debit Cash, credit Accounts Receivable).
Can I deduct a bad debt for taxes?
A business bad debt can be deducted when it becomes worthless. The amount must have been included in income, or have been a loan of cash or other value, and reasonable collection steps matter. That is IRS Tax Topic 453 (IRS Tax Topic 453). This is not tax advice.
Is a write-off the same as a charge-off?
They are related and they are not the same label. A write-off here is the journal entry that removes a receivable. A charge-off is the lending and credit-reporting word for recognizing the loss. See the charge-off event and net charge-off.
Sources
Accessed October 26, 2026. The journal entries are the standard allowance and direct write-off bookkeeping described on this page. The tax rule is the IRS topic. The dollar amounts in the worked example are illustrative.
Related guides
FCRA, TCPA, FDCPA, credit cycle, calculating receivables, the ARM industry.
Jeffery Hartman introduces qualified buyers and sellers of charged-off and non-performing debt portfolios. He does not buy debt, act as a broker, or negotiate for either side.