Bad debt expense
In accounting, bad debt expense means the P&L charge that builds the allowance for credit losses — the provision, not the write-off.
- Layer
- Lexicon
- Defined in
- Lexicon
- Nearby
- 4
Authority
This definition follows ASC 326-20.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- write-off
Nearby in the catalog
No component names this concept outright. These are the ones in its part of the system, which is a weaker claim — but a component nothing links to is a component nobody finds.
Terms this one depends on
- Allowance for credit lossesThe contra-asset holding the expected credit losses on receivables, so AR is presented at the amount expected to be collected
- Write-offRemoving an uncollectible receivable against the allowance for credit losses — under the allowance method it has no P&L effect; the expense was taken in the provision
- ExpenseOutflows or using up of assets, or incurrences of liabilities, from delivering goods or services — recognized when incurred, not when paid
- CreditThe right column. It increases liabilities, equity and revenue, and decreases assets and expenses.
Also in Receivables
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- Bad debt expense vs write-offBad debt expense is the cost of expected credit losses booked when the allowance is built; a write-off removes a specific invoice from receivables against that allowance and does not touch the P&L.Compare
- Journal entry for bad debt expenseUnder the allowance method, at each period-end debit Credit loss expense (bad debt expense) and credit Allowance for credit losses for the amount needed to bring the allowance to the expected loss on open receivables.Entry
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.