Percent-of-Receivables Bad Debt Expense (Credit Balance)

Definition: When the Allowance for Doubtful Accounts already has a credit balance before adjustment (normal situation), the Bad Debt Expense under the Percent-…

When the Allowance for Doubtful Accounts already has a credit balance before adjustment (normal situation), the Bad Debt Expense under the Percent-of-Receivables method equals the Target Allowance minus the existing credit balance. For example, if the target allowance is $5,000 and the existing credit balance is $1,200, Bad Debt Expense = $5,000 − $1,200 = $3,800.