How does aging drive the allowance for doubtful accounts under the aging method?

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Answer

The aging method applies increasing loss percentages to each bucket (older = higher risk) to estimate the required allowance for doubtful accounts. The total estimated uncollectible sets the allowance balance; the period's bad-debt expense is the amount needed to adjust the existing allowance to that target.

Bucket x rate:
  Current 100k x 1% = 1,000
  31-60  20k x 5% = 1,000
  61-90  10k x 15% = 1,500
  90+     8k x 40% = 3,200
  Required allowance = 6,700.

Real-world example The aging schedule sets a required allowance of $6,700; with $4,000 already provided, the team books $2,700 of bad-debt expense.

Common follow-ups: How do you compute the expense from the required allowance? | Why do older buckets carry higher rates?

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