The same $800 loss, recorded two different ways.
| Allowance for doubtful accounts | 800 | ||
| Accounts receivable | 800 |
| Bad debts expense | 400 | ||
| Accounts receivable | 400 |
The records expense only when a specific account is finally judged uncollectible. It is simple, but it books the loss in the wrong period and is allowed only under the .
The estimates the loss up front, building an . A write-off later never touches expense again — it just clears a specific account against the estimate already on the books.