All 23 Collections & Bad Debts questions
More in Collections & Bad Debts
How do CECL and IFRS 9 change bad-debt estimation for receivables? What escalation options exist when internal collections fail? How do you handle receivables when a customer files for bankruptcy? What is factoring and how does it differ from a collections strategy? How do you decide when to write off versus continue pursuing a debt? How do you calculate and interpret the bad-debt-to-sales ratio?
Advertisement
Back to results for “Reconciliations”
Accounts Payable & Receivable › Collections & Bad Debts

How is bad-debt expense presented in the financial statements?

Advanced

Answer

Bad-debt (impairment) expense appears in the income statement, usually within operating/SG&A expenses, reducing profit. The related allowance is a contra-asset reducing gross AR to net realizable value on the balance sheet. Write-offs reduce both gross AR and the allowance without a new expense hit.
Real-world example The income statement shows bad-debt expense in operating costs, while the balance sheet nets AR against the allowance.

Common follow-ups: Where does the allowance appear? | Why doesn't a write-off create new expense?

Aging Analysis Reconciliations Collections & Bad Debts
All 23 Collections & Bad Debts questions