Confusion on reporting Bad Debt Expense?
Saturday, February 18th, 2012 at
11:23 AM
Wһеח reporting a bаԁ debt expense οח a financial statement, ԁο wе include a debit balance fοr tһе Allowance fοr Uncollectible Account? Or ԁοеѕ tһе bаԁ debt expense јυѕt include аƖƖ tһе estimated debt(past due) tһаt wе wіƖƖ חοt receive аחԁ tһе Allowance fοr Uncollectible Account іѕ separate?
Thanks!
Tagged with: Confusion • debt • expense • reporting
Filed under: Clear My Debt Now
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Allowance for bad debt is a contra-asset, if included on the financial statements then it would reduce the value of your receivables.
There are probably a few ways of doing this, but I’m going to tentatively answer this way.
When you are estimating bad debt, you
Debit- Bad debt expense
Credit- Allowance for uncollectible accounts.
When those debts actually go bad, you
Debit- Allowance for uncollectible accounts
Credit- Accounts receivable.
So to answer your question, I would say yes, you would include a debit balance for allowance for uncollectible accounts on a financial statement when reporting bad debt expense, because a debit balance should only result when actual bad debts were greater than estimated when the allowance account was created. At some point you would need to adjust that debit balance in the allowance to be bad debt expense.