{
  "id": "bad-debt-expense",
  "version": "11d3b9481c53",
  "status": "published",
  "name": "Bad Debt Expense Calculator",
  "question": "How much is my bad debt expense?",
  "summary": "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.",
  "category": "finance",
  "subcategory": "business",
  "url": "https://www.acalculator.org/finance/bad-debt-expense-calculator",
  "markdown": "https://www.acalculator.org/finance/bad-debt-expense-calculator.md",
  "kind": "function",
  "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.",
  "assumptions": [
    "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."
  ],
  "inputs": {
    "$schema": "https://json-schema.org/draft/2020-12/schema",
    "type": "object",
    "properties": {
      "method": {
        "title": "Method",
        "description": "Percent of credit sales, percent of accounts receivable, or an aging of receivables.",
        "type": "string",
        "enum": [
          "sales",
          "receivables",
          "aging"
        ]
      },
      "sales": {
        "title": "Credit sales",
        "description": "Sales on credit for the period.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      },
      "spct": {
        "title": "Expected uncollectible",
        "description": "The percent of credit sales you expect never to collect.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 100
      },
      "ar": {
        "title": "Accounts receivable",
        "description": "Accounts receivable at the end of the period.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      },
      "apct": {
        "title": "Expected uncollectible",
        "description": "The percent of accounts receivable you expect never to collect.",
        "type": "number",
        "x-unit": "percent",
        "minimum": 0,
        "maximum": 100
      },
      "ages": {
        "title": "Receivables by age",
        "description": "Each age group of accounts receivable (0–30 days, 31–90 days, …), with the percent you expect never to collect.",
        "type": "array",
        "items": {
          "type": "object",
          "properties": {
            "a": {
              "title": "Receivables",
              "description": "Accounts receivable in this age group.",
              "type": "number",
              "x-unit": "USD",
              "minimum": 0,
              "maximum": 1000000000000000
            },
            "p": {
              "title": "Uncollectible",
              "description": "The percent of this group you expect never to collect.",
              "type": "number",
              "x-unit": "percent",
              "minimum": 0,
              "maximum": 100
            }
          }
        }
      },
      "allow": {
        "title": "Allowance balance before the entry",
        "description": "Optional: what the allowance for doubtful accounts holds before this adjustment.",
        "type": "number",
        "x-unit": "USD",
        "minimum": 0,
        "maximum": 1000000000000000
      },
      "side": {
        "title": "Type of balance",
        "description": "A credit balance (the usual case) or a debit balance (write-offs were more than the allowance).",
        "type": "string",
        "enum": [
          "credit",
          "debit"
        ]
      }
    }
  },
  "outputs": {
    "expense": {
      "label": "Bad debt expense",
      "description": "Percent of sales: credit sales × the percent. Balance sheet methods: the allowance needed − a credit balance, or + a debit balance.",
      "format": "money"
    },
    "needed": {
      "label": "Allowance needed",
      "description": "The receivables you expect never to collect: the credit balance the allowance should end with.",
      "format": "money"
    },
    "total": {
      "label": "Accounts receivable",
      "description": "All the receivables: the amount you entered, or the age groups added up.",
      "format": "money"
    },
    "net": {
      "label": "Net realizable value",
      "description": "Accounts receivable − the allowance needed: what you expect to collect.",
      "format": "money"
    }
  },
  "defaultAnswer": {
    "inputs": {
      "method": "sales",
      "sales": 458230,
      "spct": 5,
      "ar": 324850,
      "apct": 15,
      "ages": [
        {
          "amount": "145740",
          "pct": "10"
        },
        {
          "amount": "102100",
          "pct": "20"
        },
        {
          "amount": "77010",
          "pct": "30"
        }
      ],
      "side": "credit"
    },
    "outputs": {
      "expense": 22911.5
    },
    "text": "Your bad debt expense for the period is $22,911.50."
  },
  "examples": [
    {
      "given": {
        "method": "sales",
        "sales": 458230,
        "spct": 5
      },
      "expect": {
        "expense": 22911.5
      },
      "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"
    },
    {
      "given": {
        "method": "receivables",
        "ar": 324850,
        "apct": 15,
        "allow": 23000,
        "side": "credit"
      },
      "expect": {
        "expense": 25727.5,
        "needed": 48727.5,
        "total": 324850,
        "net": 276122.5
      },
      "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; 48,727.50 − 23,000 = 25,727.50; hand calculation in content.mdx: 324,850 − 48,727.50 = 276,122.50"
    },
    {
      "given": {
        "method": "aging",
        "ages": [
          {
            "amount": 145740,
            "pct": 10
          },
          {
            "amount": 102100,
            "pct": 20
          },
          {
            "amount": 77010,
            "pct": 30
          }
        ],
        "allow": 20000,
        "side": "debit"
      },
      "expect": {
        "expense": 78097,
        "needed": 58097,
        "total": 324850,
        "net": 266753
      },
      "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; 58,097 + 20,000 = 78,097; hand calculation in content.mdx: 324,850 − 58,097 = 266,753"
    },
    {
      "given": {
        "method": "receivables",
        "ar": 222850,
        "apct": 9
      },
      "expect": {
        "expense": 20056.5,
        "needed": 20056.5
      },
      "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"
    },
    {
      "given": {
        "method": "receivables",
        "ar": 100000,
        "apct": 2,
        "allow": 2500,
        "side": "credit"
      },
      "expect": {
        "expense": -500,
        "needed": 2000
      },
      "source": "hand calculation in content.mdx: 100,000 × 2% = 2,000; 2,000 − 2,500 = −500, an entry that lowers the allowance"
    }
  ],
  "sources": [
    "OpenStax, Principles of Financial Accounting, 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches: the income statement method (credit sales × percent; BWW $458,230 × 5% = $22,911.50), the balance sheet method (accounts receivable × percent; $324,850 × 15% = $48,727.50, less a $23,000 credit balance = $25,727.50), and the balance sheet aging method ($145,740 at 10%, $102,100 at 20%, $77,010 at 30% = $58,097; with a $20,000 debit balance, $78,097); Heating and Air Company: $222,850 × 9% = $20,056.50. https://openstax.org/books/principles-financial-accounting/pages/9-2-account-for-uncollectible-accounts-using-the-balance-sheet-and-income-statement-approaches (retrieved 2026-10-19)"
  ],
  "related": [
    "accounts-receivable-turnover",
    "dso",
    "current-ratio",
    "working-capital"
  ],
  "changelog": []
}