Bad Debt and Allowances

Bad Debt and Allowances covers allowance methods, write-offs, bad-debt expense, recovery, and doubtful-account treatment for receivables.

Use these pages when receivable quality changes revenue collectability, working capital, credit risk, cash conversion, or earnings quality. It sits inside Receivables and Bad Debt, so readers can move up when the broader accounting context matters.

Use the table below to choose the narrower accounting branch before applying a term to a statement line, model input, audit trail, tax schedule, covenant test, or management report.

What This Branch Covers

What to Check

• Invoice, aging schedule, customer balance, allowance methodology, write-off record, collection history, and credit terms.
• Whether the receivable is trade, nontrade, current, past due, doubtful, written off, pledged, or factored.
• Effect on revenue quality, bad-debt expense, allowance, working capital, cash flow, DSO, and credit exposure.
• Customer concentration, dispute status, payment behavior, collateral, and subsequent collection evidence.
• Comparability across periods, credit policies, industries, and reserve methods.

Common Mistakes

• Treating receivables as cash without checking collectability.
• Ignoring aging, disputes, concentrations, and allowance changes.
• Comparing DSO without matching revenue recognition and credit terms.
• Assuming a write-off means the original sale was never recorded.

Receivables content is educational and does not provide accounting, audit, tax, credit, legal, collection, investment, or valuation advice.

In this section

Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.