Writing Off an Uncollectible Account When it becomes apparent that an individual account receivable will not be collectible, the amount is deducted from Allowance for Uncol-lectible Accounts as well as Accounts Receivable. For example, if Alford determines that a customer account for Joyce Kilgore of $125 will not be collected, the following general journal entry is recorded: Note that the Allowance for Uncollectible Accounts is debited rather than Bad Debt Expense when an individual account is written off. No expense results from the write-off of an account receivable. The amount of the expense was recorded as an estimate at the end of the accounting period in which the revenue was recorded. This factor is evidenced by a review of the expected realizable value of the accounts receivable before and after the write-off of the uncollectible account. This analysis reveals that the expected amount to be collected from the outstanding accounts receivable is not affected by the write-off of an uncollectible account. The write-off reduces both Accounts Receivable and Allowance for Uncollectible Accounts by the same amount but does not affect the amount expected to be collected from the outstanding accounts receivable. Credit Cards In recent years, credit cards, such as VISA, MasterCard, and American Express, have become popular with customers. Almost all companies offering merchandise or service to the public now accept credit cards. A major advantage of credit cards to businesses is that bad debt losses are passed on to the bank or company that issued the credit card. In return, the company that accepts a credit card for customer purchases must pay a service charge to the company or bank issuing the card. These service charges range from 1 percent to 10 percent of the sales price of the merchandise. Credit cards are issued by banks or other agencies, usually for an annual fee, to individuals who establish a line of credit. The individual then uses the credit card to purchase goods and services. Credit card sales above $50 usually require prior credit agency approval; however, this process has been facilitated by computer access to phone lines and cash registers. Many companies accepting credit cards have now networked their cash registers directly to credit card agencies so no credit card sale can be made without prior agency approval.