The two basic steps in the recording of doubtful accounts are:
1. The amount of bad accounts is estimated whenever financial statements are to be produced. An adjusting
entry then recognizes the expense in the same period as the sales revenue. It also increases the allowance
for doubtful accounts (to reduce the reported receivable balance to its anticipated net realizable value).
2. Subsequently, whenever a specific account is deemed to be worthless, the balance is removed from both
the accounts receivable and the allowance for doubtful accounts T-accounts. The related expense has been
recognized previously and is not affected by the removal of the uncollectible account.