# How much is my bad debt expense?

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.

- Page: https://www.acalculator.org/finance/bad-debt-expense-calculator
- JSON spec: https://www.acalculator.org/finance/bad-debt-expense-calculator.json
- Version: 11d3b9481c53

## Default answer

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.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| method | Method | Percent of credit sales, percent of accounts receivable, or an aging of receivables. |
| sales | Credit sales | Sales on credit for the period. |
| spct | Expected uncollectible | The percent of credit sales you expect never to collect. |
| ar | Accounts receivable | Accounts receivable at the end of the period. |
| apct | Expected uncollectible | The percent of accounts receivable you expect never to collect. |
| ages | Receivables by age | Each age group of accounts receivable (0–30 days, 31–90 days, …), with the percent you expect never to collect. |
| allow | Allowance balance before the entry | Optional: what the allowance for doubtful accounts holds before this adjustment. |
| side | Type of balance | A credit balance (the usual case) or a debit balance (write-offs were more than the allowance). |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| expense | Bad debt expense | Percent of sales: credit sales × the percent. Balance sheet methods: the allowance needed − a credit balance, or + a debit balance. |
| needed | Allowance needed | The receivables you expect never to collect: the credit balance the allowance should end with. |
| total | Accounts receivable | All the receivables: the amount you entered, or the age groups added up. |
| net | Net realizable value | Accounts receivable − the allowance needed: what you expect to collect. |

## 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.

## Worked examples

1. method = sales, sales = $458,230.00, spct = 5% gives 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 = receivables, ar = $324,850.00, apct = 15%, allow = $23,000.00, side = credit gives expense = $25,727.50, needed = $48,727.50, total = $324,850.00, net = $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, ages = {"amount":145740,"pct":10} or {"amount":102100,"pct":20}, allow = $20,000.00, side = debit gives expense = $78,097.00, needed = $58,097.00, total = $324,850.00, net = $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 = receivables, ar = $222,850.00, apct = 9% gives expense = $20,056.50, 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 = receivables, ar = $100,000.00, apct = 2%, allow = $2,500.00, side = credit gives expense = -$500.00, needed = $2,000.00.

## FAQ

### 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.

## 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)