The Bad Debt Expense Calculator is a financial tool designed to estimate the amount of debt that is expected to be uncollectible. This calculation helps businesses account for potential losses from customers who fail to pay their credit obligations. By using this calculator, companies can accurately reflect the financial impact of bad debts on their income statements and plan accordingly.
Formula of Bad Debt Expense Calculator
To calculate bad debt expense, use the following detailed formula:
Bad Debt Expense = Total Credit Sales * Percentage of Uncollectible Sales
Detailed Formula:
Bad Debt Expense (BDE) = Total Credit Sales (TCS) * Percentage of Uncollectible Sales (PUS)
Where:
Bad Debt Expense (BDE)is the expense recognize for accounts receivable that are expect to be uncollectible.Total Credit Sales (TCS)is the total amount of sales made on credit.Percentage of Uncollectible Sales (PUS)is the estimate percentage of credit sales that will not be collect.
General Terms Table
| Term | Definition |
|---|---|
| Bad Debt Expense (BDE) | The amount of debt expected to be uncollectible. |
| Total Credit Sales (TCS) | The total sales made on credit during a specific period. |
| Percentage of Uncollectible Sales (PUS) | The estimated percentage of credit sales that will not be collected. |
| Allowance for Doubtful Accounts | A contra-asset account that reduces the value of accounts receivable. |
Example of Bad Debt Expense Calculator
Let’s say a company has total credit sales of $100,000 and estimates that 5% of these sales will be uncollectible.
Using the formula:
Bad Debt Expense = Total Credit Sales * Percentage of Uncollectible Sales
Bad Debt Expense = $100,000 * 0.05 = $5,000
In this example, the bad debt expense is $5,000, meaning the company should account for this amount as an expense due to expected uncollectible accounts.
Most Common FAQs
Bad debt expense is the amount of money that a company expects to lose from credit sales that will not be collect. This expense is record on the income statement and helps companies anticipate and manage potential losses.
The percentage of uncollectible sales is typically estimate based on historical data and industry averages. Companies may review past credit sales and the proportion of those that became uncollectible to make an informed estimate.
Yes, bad debt expense can be adjust if new information indicates that the initial estimate was inaccurate. Adjustments are make to ensure that financial statements accurately reflect the expect losses from uncollectible accounts.