We are recording an allowance for bad debt. We debit bad debt expense and credit a contra Revenue Account. I an finding that we are rolling the bad debt expense into Contribution Revenue on the Statement of changes in Net Assets. THis does't seem correct to me.
Where does bad debt expense show up on the Statement of changes in Net Assets - Non Profit accounting Fund accounting
Answers
Jacalyn,
if you are allowing for bed debt and while debiting bed debt expense, if you credit contra revenue account, that increases your revenue and that is definitely not correct.
If there is an allowance of bed debt, there should be a reduction in Receivables or (Provision for reduction in receivables) because you are not expecting to receive that much money form your receivables and that is why you are allowing for bed debt.
Thus the credit should be Account Receivables (if it is actual bed debt) or Provision for Doubtful Debts (decreasing from Receivables Balance) when you debit Bed Debt Expense.
Let me know if this doesn't help or if you have any additional question.
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Accounting