acalculator

How much is my bad debt expense?

Pick a method and enter your credit sales or accounts receivable with the percent you expect never to collect. For the balance sheet methods, add the allowance for doubtful accounts balance before the entry, and the calculator gives the bad debt expense to record.

Your numbers

Method
Bad debt expense
$22,911.50

Your bad debt expense for the period is $22,911.50.

Bad debt expense: $22,911.50. Your bad debt expense for the period is $22,911.50.

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes bad debt expense by the percent of credit sales, percent of receivables or aging of receivables method, with the allowance for doubtful accounts it leaves.

Example with the default inputs (Method Percent of sales, Credit sales $458,230.00, Expected uncollectible 5%): Your bad debt expense for the period is $22,911.50.

Method: Percent of sales: expense = credit sales × percent ÷ 100. Percent of receivables: needed = receivables × percent ÷ 100. Aging: needed = Σ(group × percent ÷ 100). Balance sheet methods: expense = needed − a credit balance, or needed + a debit balance; net realizable value = receivables − needed.

  • The percent-of-sales method ignores any balance already in the allowance; the balance sheet methods bring the allowance to the amount needed.
  • A negative expense means the allowance already holds more than is needed, and the entry lowers it.
  • Arithmetic is exact on the typed decimals; money shows to the cent, halves up.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Method Percent of sales, Credit sales $458,230.00, Expected uncollectible 5% gives Bad debt expense $22,911.50.Source: OpenStax, Principles of Financial Accounting, 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches (Billie’s Watercraft Warehouse: credit sales $458,230 × 5% = $22,911.50; accounts receivable $324,850 × 15% = $48,727.50, less a $23,000 credit balance = $25,727.50; aging $145,740 at 10%, $102,100 at 20%, $77,010 at 30% = $58,097, plus a $20,000 debit balance = $78,097). https://openstax.org/books/principles-financial-accounting/pages/9-2-account-for-uncollectible-accounts-using-the-balance-sheet-and-income-statement-approaches: 458,230 × 5% = 22,911.50
  2. Method Percent of receivables, Accounts receivable $324,850.00, Expected uncollectible 15%, Allowance balance before the entry $23,000.00, Type of balance Credit gives Bad debt expense $25,727.50, Allowance needed $48,727.50, Accounts receivable $324,850.00, Net realizable value $276,122.50.Source: OpenStax, Principles of Financial Accounting, 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches (Billie’s Watercraft Warehouse: credit sales $458,230 × 5% = $22,911.50; accounts receivable $324,850 × 15% = $48,727.50, less a $23,000 credit balance = $25,727.50; aging $145,740 at 10%, $102,100 at 20%, $77,010 at 30% = $58,097, plus a $20,000 debit balance = $78,097). https://openstax.org/books/principles-financial-accounting/pages/9-2-account-for-uncollectible-accounts-using-the-balance-sheet-and-income-statement-approaches: 324,850 × 15% = 48,727.50
  3. Method Aging, Receivables by age 145740 10; 102100 20; 77010 30, Allowance balance before the entry $20,000.00, Type of balance Debit gives Bad debt expense $78,097.00, Allowance needed $58,097.00, Accounts receivable $324,850.00, Net realizable value $266,753.00.Source: OpenStax, Principles of Financial Accounting, 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches (Billie’s Watercraft Warehouse: credit sales $458,230 × 5% = $22,911.50; accounts receivable $324,850 × 15% = $48,727.50, less a $23,000 credit balance = $25,727.50; aging $145,740 at 10%, $102,100 at 20%, $77,010 at 30% = $58,097, plus a $20,000 debit balance = $78,097). https://openstax.org/books/principles-financial-accounting/pages/9-2-account-for-uncollectible-accounts-using-the-balance-sheet-and-income-statement-approaches: 14,574 + 20,420 + 23,103 = 58,097
  4. Method Percent of receivables, Accounts receivable $222,850.00, Expected uncollectible 9% gives Bad debt expense $20,056.50, Allowance needed $20,056.50.Source: OpenStax, Principles of Financial Accounting, 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches (Billie’s Watercraft Warehouse: credit sales $458,230 × 5% = $22,911.50; accounts receivable $324,850 × 15% = $48,727.50, less a $23,000 credit balance = $25,727.50; aging $145,740 at 10%, $102,100 at 20%, $77,010 at 30% = $58,097, plus a $20,000 debit balance = $78,097). https://openstax.org/books/principles-financial-accounting/pages/9-2-account-for-uncollectible-accounts-using-the-balance-sheet-and-income-statement-approaches (Your Turn, Heating and Air Company): 222,850 × 9% = 20,056.50
  5. Method Percent of receivables, Accounts receivable $100,000.00, Expected uncollectible 2%, Allowance balance before the entry $2,500.00, Type of balance Credit gives Bad debt expense -$500.00, Allowance needed $2,000.00.

How it works

Percent of credit sales (the income statement method):

  • Bad debt expense = credit sales × percent ÷ 100

Percent of accounts receivable (a balance sheet method):

  • Allowance needed = accounts receivable × percent ÷ 100

Aging of receivables (a balance sheet method), with groups 1 to n:

  • Allowance needed = Σ (group receivables × group percent ÷ 100)
  • Accounts receivable = Σ group receivables

For both balance sheet methods, with B the allowance balance before the entry:

  • Bad debt expense = allowance needed − B for a credit balance, or allowance needed + B for a debit balance
  • Net realizable value = accounts receivable − allowance needed

Rules:

  • Each amount is $0 or more and at most $1 quadrillion; each percent is from 0% to 100%. The aging table has 1 to 12 groups.
  • The percent-of-sales method uses no allowance balance and shows only the expense. An empty allowance balance counts as $0, and an empty type of balance counts as a credit balance.
  • The expense may be negative under the balance sheet methods, when a credit balance is more than the allowance needed.
  • A result that is not 0 but too small to show as a number gives no answer, with the message "Bad debt expense is too small to show as a number.", "The allowance needed is too small to show as a number." or "The net realizable value is too small to show as a number.", checked in that order.
  • The arithmetic is exact on the decimals you type. Money shows to the cent, with halves rounded up (away from 0).

Assumptions

  • The business uses the allowance method, estimating uncollectible accounts at the end of each period.
  • The percents are your own estimates from past collections; this page does not supply them.

Worked examples by hand

Percent of credit sales. $458,230 of credit sales at 5%: 458,230 × 5 ÷ 100 = $22,911.50.

Percent of receivables. $324,850 of receivables at 15% needs 48,727.50 in the allowance. With a $23,000 credit balance: expense = 48,727.50 − 23,000 = $25,727.50. Net realizable value = 324,850 − 48,727.50 = $276,122.50.

Aging. $145,740 × 10% = 14,574; $102,100 × 20% = 20,420; $77,010 × 30% = 23,103. Allowance needed = $58,097. With a $20,000 debit balance: expense = 58,097 + 20,000 = $78,097. Net realizable value = 324,850 − 58,097 = $266,753.

No balance in the allowance. Heating and Air Company: $222,850 × 9% = $20,056.50.

The allowance already holds too much. $100,000 × 2% = 2,000 needed, with a $2,500 credit balance: 2,000 − 2,500 = −$500.

Other questions people ask

What is bad debt expense?

Bad debt expense is the cost of sales on credit that customers will never pay. Under the allowance method, a business estimates it each period and records it in the allowance for doubtful accounts, before it knows which customers will not pay.

How do I calculate bad debt expense from sales?

Multiply the period's credit sales by the percent you expect never to collect. Billie's Watercraft Warehouse had $458,230 of credit sales and expected 5% to go unpaid: 458,230 × 5% = $22,911.50 of bad debt expense.

How do I calculate bad debt expense from accounts receivable?

Multiply the ending accounts receivable by the percent you expect never to collect to get the allowance you need, then subtract what the allowance already holds. BWW's $324,850 of receivables at 15% needs $48,727.50; with a $23,000 credit balance already there, the expense is $25,727.50.

How does the aging method work?

Group the receivables by how long they are past due, give older groups a higher uncollectible percent, and add up each group × its percent. BWW: $145,740 at 10%, $102,100 at 20% and $77,010 at 30% give $14,574 + $20,420 + $23,103 = $58,097 needed in the allowance.

What if the allowance has a debit balance?

A debit balance means more accounts were written off than the allowance held. Add it to the amount needed, because the entry must cover it too. With $58,097 needed and a $20,000 debit balance, the expense is 58,097 + 20,000 = $78,097.

Why does the sales method ignore the allowance balance?

The percent-of-sales method estimates the expense of the period directly from its sales, matching the expense to the revenue. The balance sheet methods estimate what the allowance should hold at the end, so they need the balance already in it.

Can the bad debt expense be negative?

Yes, under the balance sheet methods, when the allowance already holds more than you now expect to lose. With $2,000 needed and a $2,500 credit balance, the entry lowers the allowance by $500, and the calculator shows −$500.