In the early stages, the bad debt accrual does not appear on the books, since we don’t know which accounts will go bad. To accommodate this need, some companies, espe-cially those that are audited, set up accounts based on aging categories or on a certain rate multiplied by sales. To set up such an account in the amount of $5,000, for example, the accountant debits Bad Debt Expense for $5,000, credits Reserve for Bad Debt Expense for $5,000, and notes this transaction as “Records accrual for bad debts.”