A Bad Debt Calculator is designed to help businesses estimate the amount of receivables that will not be collected. By inputting the total accounts receivable and the estimated percentage of uncollectible accounts, this calculator provides a clear estimate of potential bad debt. This information is essential for accurate financial forecasting and for making informed business decisions.
Formula of Bad Debt Calculator
To calculate bad debt, use the following detailed formula:
Bad Debt = Accounts Receivable * Percentage of Uncollectible Accounts
Detailed Formula:
Bad Debt (BD) = Accounts Receivable (AR) * Percentage of Uncollectible Accounts (PUA)
Where:
- Bad Debt (BD) is the estimated amount of receivables that are expect to be uncollectible.
- Accounts Receivable (AR) is the total amount of money owed by customers.
- Percentage of Uncollectible Accounts (PUA) is the estimated percentage of accounts receivable that will not be collected.
General Terms and Table
For ease of reference, here is a table of common terms and their conversions related to bad debt:
| Term | Description |
|---|---|
| Accounts Receivable (AR) | The total amount of money owed by customers. |
| Percentage of Uncollectible Accounts (PUA) | The estimated percentage of receivables that will not be collected. |
| Bad Debt (BD) | The amount of receivables expected to be uncollectible. |
Example of Bad Debt Calculator
Let’s consider a business with $100,000 in accounts receivable and an estimated uncollectible accounts percentage of 5%. To find the bad debt:
- Identify the total accounts receivable: $100,000
- Determine the percentage of uncollectible accounts: 5% or 0.05
- Apply the formula:
Bad Debt (BD) = $100,000 * 0.05
Bad Debt (BD) = $5,000
So, the estimated bad debt is $5,000.
Most Common FAQs
Calculating bad debt helps businesses estimate the amount of receivables that will not be collect, aiding in accurate financial forecasting and risk management.
It is advisable to calculate bad debt regularly, such as quarterly or annually, to keep financial reports up-to-date and reflect any changes in the collectibility of receivables.
Yes, the percentage of uncollectible accounts can be adjust base on historical data, industry trends, and changes in the business environment.