What's the entry to record bad debt expense?

Answer 1

If this is a company or business. If the sale or loan had been recorded on the books on an accrued basis. Then you would issue a credit memo for the invoice, credit accounts receivable and debit Bad Debt Expense.

Now if this is a personal loan, you would report it on your tax return as short term capital loss that has limitations. And could be used against long term capital gains. And it can be carried forward if you have not long term capital gains this year.

http://www.irs.gov/taxtopics/tc453.html

Answer 2

An example of the journal entry would be


2/7/7 Bad Debt Expense...................... 5,000
............Bad Debt Allowance .................................... 5,000

(Debit expense & credit allowance account)