You extend credit to your regular customers, and normally do not experience any trouble collecting from them. Since you rarely have trouble collecting from your customers, you have not set up a reserve for bad debts. However, as you review your accounts receivable at year end, you notice that a particular customer, now insolvent, still owes you $750. You are certain that you will never be paid. Write off this account by making the following adjusting entry:

You extend credit to your customers, and experience tells you that a small amount of your sales on account will never be collected. On December 31, 2010, you evaluate your accounts receivable. You estimate that $1,000 of your receivables will not be collectible. On December 31, 2009, you estimated that $800 of your receivables at that time were uncollectable and your reserve for bad debts account in the general ledger currently reflects that $800 balance. You need to make the following adjusting entry to record this $200 increase in estimated bad debts: