How would you preform the journal entries for a client that is disputing claiming a shortage, but are deducting that from their payment to us that is an accounts receivable. I am counter disputing as I have signed BOLs and proof, how do I write these entries, so that I can show the deduction, but also have the amount show as a payable for the future when repaid. If this is not the right place to ask this question sorry. Thank you for your help.
USA Help with journal entries for Accounts Receivables
- Thread starter carguy
- Start date
You can use the allowance method in this way:
1. You bill client $1,000 for goods so you have a $1,000 A/R on the books
2. Client disputes bill. So estimate what part of the $1,000 can be collected
3. If only $400 is estimated to be collected then record the $600 this way: DR to Expense - Bad Debt expense for $600 and Cr to a new balance sheet acct under the A/R acct called "Allowance for Bad Debts' Credit $600
4. Now your balance sheet shows
A/R $1,000
Allowance for Bad Debts <,600>
Net A/R 400
When the issue is resolved you adjust the Allowance account
1. You bill client $1,000 for goods so you have a $1,000 A/R on the books
2. Client disputes bill. So estimate what part of the $1,000 can be collected
3. If only $400 is estimated to be collected then record the $600 this way: DR to Expense - Bad Debt expense for $600 and Cr to a new balance sheet acct under the A/R acct called "Allowance for Bad Debts' Credit $600
4. Now your balance sheet shows
A/R $1,000
Allowance for Bad Debts <,600>
Net A/R 400
When the issue is resolved you adjust the Allowance account