Calculating Bad Debt Expense and Allowance for Doubtful Accounts 

I enjoy how thorough you are. No matter how many views you get, just remember that you have a solid 14.5 k people who appreciate you. Thank you

I've spoken with 2 different professors and didn't get the % of Receivables when there is a DR balance. I watched your 17 minute video and I get it!! Thank you so much. I really appreciate it. My homework is going to be a breeze and I'm not stressing this weeks quiz. Priceless!!

6 years later, at 2:30am, exam the morning, just want to say thank your soul!!!

this video is so helpful i'm literally commenting 7 years from release and it's saving me before me midterm ty :)

Okay, I know this is a 2013 video but I wanted you to know that here in 2019, you saved me. Read the entire chapter, practiced the exercises with the solutions manual, and I still didn't get it. They didn't explain the reasoning for the calculations. You were able to break the mental blockage I had, I finally get it now, thank you so much.

I love this. I have discussed this with my professor a hundred times and could never understand the placement in the t-accounts

This video is great! I’m studying for an accounting exam and you made clear all my doubts about this two methods. Thanks a lot for sharing! 😁

The colour separation really helped me understand the bigger picture of this concept. Thank you so much 🙏🏼

I saw this video again for revising a concept for CFA and every time I'll see this, I'll drop in a thank you!

my textbook did a horrible job of explaining this, thank you so much for clearing it up for me!! (I'm a BS in accounting student.)

You are awesome. I was so confused, but your step by step, detailed information is a breath of fresh air. Thank you

Thx a lot Miss. Kristin, you are one of the best teachers on the youtube. 💙💙💙💙

Accounting is my major and it is a love-hate relationship. I love it, but it is difficult to understand at times. Thank you so much for your videos, you have made accounting understandable to me. Keep it up, you are helping a ton of people!

Your ability to teach is freakishly good..

My first time on this channel as I was looking for help to understand this complicated topic. Thank you for the amazing explanation!

Thank you for clear instruction. This is very helpful. I was struggling with balance sheet method for calculating bad debt expense, and this helps.

I've been struggling with this topic for a couple of weeks - my instructor has been calling the methods Sales and Receivables and I was so so lost. This video has helped a lot. Thank you!

Kristin, I'm so happy that I found you...thank you so much for this video...

This video was so helpful. You broke everything down and went step by step making it easy to understand. Thanks!!!

literal life saver an easy concept such as the t chart was giving me so much trouble . until i watched this video thank you so much

Thank You I will ease the test tomorrow of this video.

Can't even tell you how much I appreciated this video as well as the previous! More helpful than my professor!!! Thank you

Thank you!! Your video made this theory click in my brain. I appreciate this video so much!

Your explanation is great. I am so thankful for your generosity to offer your time and knowledge and talent as a present to those who need help to understand. thnak you.

Thank you, breaking it up into balance sheet and income statement is helpful! I have a test coming up wish me luck

One of the best videos out there. I have been confused for a month and this videos cleared all my confusion!

Thank you again for your time and explaining Bad Debt Expense and Allowance for Doubtful Accounts. It is appreciated more than you know. I have one question, if a customer paid their account and the customers account has been written off, how do we make the adjustment? Thank you again for your help.

Wow, what a way to explain accounting concepts easily! I have an exam coming up and I will not forget the rent+overdrawn example. Thank you so much for sharing your knowledge!

i am glad i watched your videos on A/R. simple and well thought out explanations, anybody can understand. i read some comments about other professors or instructors. its all about how you explain it.

Thank you for the way you explain this adjusting entries 🙌🏼

Thank you so much! The part that I was confused over got resolved thanks to your lecture!

thank you so much! Ive learned more in this one video than I have all semester 🙌🏽

Appreciate this. Most explanations focus on the mechanics, but your videos put more effort into understanding and how the accounts and process work.

So good and clear~ it is nice to provide an example and tell us the difference between these two method. And now I have got how to make the statements. Thank u so much !

Excellent explanation. Your explanations are very relatable. Thank you Kristin

Thank you for this great example! Made it very clear and easy to follow.

Very easy and straight forward teaching. I like it.

you’re saving me from failing my accounting test soon 🥺 THANK YOU!!!

Great video & method to clarify the different methods. One minor criticism is the use of the colour purple on a black background which is difficult to see. Just to clarify, the 2 methods (% of sales & % of A/R) give different results correct? The 20k you mentioned is not the same - ie. in the I/S method the 20k is NOT a balance, while in the B/S method it is a final balance of that account. Thanks.

Thank you Kristin.Your method has helped me a lot. Greetings from Papua New Guinea

Thank you so so much.. I had been struggling to understand this since ages and always ended up skipping this in my exams, not anymore!

Fantastic video.. I am surprised that you don't have more subscribers.

God bless you and your comforting voice

You are awesome . Explained beautifully . I got a good grade from just your videos . Thanks !

Dang!! I've been studying and trying to understand this for 2 weeks. I watched this video and the one before this one and I totally get it now. Thank you so much. I really appreciate it.

Since we are calculating bad debt at the end of an accounting cycle, when you gave the example of the $9,000 debit balance for Allowance of Doubtful Accounts in the last portion of this video, does this mean that this company has miscalculated their bad debt expense of the PRIOR year by $9,000 or would/could this include bad debt that is being realized during this fiscal period as well? For Example: say at the end of the PRIOR fiscal period, they calculate the Allowance to be $7,750. At the end of THIS fiscal period and they have a $9,000 debit balance for their Allowance, they realized (or recorded) bad debt of $16,750 (they used up the $7,750 allowance of the previous fiscal period PLUS and additional $9,000?)through out the fiscal period. So the next fiscal year, they will have $29,000 allowance (overdraft protection). OR could it be bad debt that they have realized since the beginning of this fiscal period and didn't use up any of last fiscal year's allowances? or even a combo of both?

Kristin! I am studying for the CMA you are amazing! Thanks so much I am so glad I found you!

Best Lecture for Bad Debt Expenses adjust. Thanks for your Perfect lecture.

very easy-understand explanation, thank you very much

For example I have to solve for upcoming years like so: (refer to attached docx) I used the %of sales method and got $5,400; $6000, & $6,150 for each year (2007,2008 & 2009) But it didn’t look right I feel like it needs more since it’s providing the allowance for DA for Jan 1, 2007. I would really appreciate your assistance!

Thank you so much for the brilliant explanation. One question though, what would happen if the allowance for doubtful accounts had an initial balance that exceeded the current period Allowance for doubtful accounts? So meaning what would happen if our Allowance for doubtful accounts in the initial question was $22,000, and we calculated the $20,000 for the current period Allowance for DA?

Can you move to Florida. Apply at University of Central Florida and teach here because what something as simple as this becomes a mission impossible for these teachers.

This example is amazing. Thank very much :) I was looking for that last part for three days. The Allowance account with debit balance. of $9,000 :)

thank you so much for making this topic so easy to understand.. can u clarify that in case Income statement method, in balance sheet, $32000will be deducted from account receivable as allowance of doubtful account, but on the contrary in balance sheet method $20000will be deducted from account receivable as allowance of doubtful account

Hi Kristin I have a doubt 1) Is there any difference between Allownace for doubtful debts and provion for doubtful debts? 2)If we are given a "write-off during the year" in question does it mean "Bad debts during the year". 3)Does "Bad debts during the year " means "Actual bad debts incurred by company during the year"? 4)If there is say "Allowance for doubtful debts" in 2014 i.e $92 Does it denotes ending balance? 5)When will we reduce Allownace for doubtful debts ? Looking forward to hear from you

The video helped me to have a better understanding of this topic. Thanks!

Thank you very much Kristin, you are so helpful to me going through the accounting final exams. I watched the other guys (Ininjanotes, khanacademy) but they are just talking too much about other craps rather than go straight to the point that i need like you. Other things that: You make your video too long to write stuff, i mean if you can write faster or cut the process of you writing it would be less boring to watch. Anway, thanks Kristin.!

The best video on this topic out there!

I would love to see how this plays out as a Landlord with property damages exceeding the security deposit.

Good but with it was faster. Shorten some words like I/S for income statement

Thank you so much for your videos and clear explanations Kristin, they are the most helpful ones that I have seen!

for the percentage of sales method, are we using total revenue (cash sales + credit sales)?, or are we just using credit revenue sales (cause we already have the cash)?

Thank you Kristin i really enjoyed with your method . please keep going

question, the 200k of account receivable is the ending balance of a/r? so does that mean that to calculate the amount that is going to be uncollectible we have to use the ending balance of A/R?

Hey, great explanation. But, there is one thing that really annoyed me regarding to Allowance method. If in direct write off method we recover the bad debt expense account in income statement as revenue/uncollectible recovery or what ever the account is, why wouldn't we do the same thing in the allowance method. Every book always explained that we need two entries to recover bad debt which had been written off(when the customer paid the doubtful account which had been written off): 1) Receivables(Dr),Allowance(Cr) , and 2)Cash(Dr),Receivables(Cr). in my logic, if the Receivables already paid, it means the allowance should be removed too, but these two entries ignore the fact that we already recorded the bad debt expense in the first place. In my opinion, we need one more entry : Allowance(Dr),Retained Earning(Cr) or Bad debt recovery(Cr-Income statement). Because the doubtful account wasn't there anymore when the receivables already paid and we need to recover the retained earning because the expenses didn't really happen. What do you thing about my case? Please help me to solve this case. Thanks.

You made this very easy to understand!

This is the best explanation I've seen. Thanks!

hey just found this video. we are studying accounts receivable and allowance for DA. I understand the concept but when you did the balance sheet method, why is the amount for the balance? why are they different? thank you so much

thank you a looot!!! i will watch all your videos right now, bcz its so clear to me !! youre great !

Hello Kristin. Greeting :) I have two questions for you. I would appreciate it If you could give me a hand on this... Q1. How come The allowance of uncollectible accounts become a debt balance ? Because the first entry is estimation and the second entry is write off! 2. What will happen If I make a wrong estimation for the allowance - Assume We have estimation (ie. I read in the news paper the client is not doing good) for the first year 10% from AR aging 100000 so the entry will be at Dec 31. DR (Bad debt Expense 10000) CR (Allowance 10000). In the second year the clients pay me the full 10000 What would be my entry to cancel the estimation entry of the first year in the second year? Note. No write off entry has been made because (ie. No bankruptcy) Should I close the allowance in the Retained Earning or Recovery of bad debt or Which Account? Thanks in Advance

Thank you madam you are a life saver

A little late on the bandwagon here but great video! Thanks a ton.

mam i have one question why do some teachers pass journal entry like (i)Bad debt a/c Dr. To Debtor a/c Cr. (ii)Further Bad debt a/c Dr. To Debtor a/c Cr. (iii) Allowance for Doubtful Account a/c Dr. To (Bad debt+further bad debt) a/c Cr. Instead of Doing this For bad debt (i) Allowance for doubtful Account a/c Dr. To Debtor a/c Cr. For further bad debt (ii) Allowance for doubtful Account a/c Dr. To Debtor a/c Cr.

Thanks for the you detailed example. The time you take and your notation style is very helpful. My question is: how do you note the set up of a bad debt account using the allowance method? Is there a tax implication NIBT/NIAT? Am I over thinking this? Thank you, again.

Thank you for this video! Now I will pass my test for sure :D

soooooooooo Helpful! I have a final tmr and was stressing about this issue.

This video was very helpful in your class. Thank you.

Hi, I don't understand as to why you put the percentage of sales (income sales method) within the T-account and the percentage of credit sales(balance sales) at the end of the T-account. Can you further elaborate? Thank you very much

Very helpful video! My question is regarding the percentage of sales method. If I have a returns and allowance balance regarding credit sales, what would I be doing with this number? Thanks!

You explained that so perfectly!! Thank you!

Wow, great video! Please continue doing more! You are wonderful.

Hi Kristin. Thank you for the video. Can you please make one for Notes Receivables with Premiums and Discounts? Thanks!

So why does the Income Statement method calculate the change in the Allowance account and the Balance Sheet method calculate the ending balance of the account? Why don't both methods just stick to one (either change in allowance account or ending balance of the account)? Is there a logical explanation or is this just the way it works?

a. Sold $1,348,000 of merchandise (that had cost $979,400) on credit, terms n/30. b. Wrote off $19,600 of uncollectible accounts receivable. c. Received $666,900 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 2.50% of accounts receivable will be uncollectible. What would the bad debt expense be? (This is a homework question i have been working on. applied what i saw on the video and it is still wrong. any help is appreciated)

What happens if we allocate a higher allowance for bad debt and some of it is actually repaid - or that we dont get to write it off? Bad debt as mentioned in the allowance and expense account is only an estimate as far as I have understood.

IN A TRADING ACCOUNT WHICH ANSWER GO TO INCOME STATEMENT (EXPENSES) AND WHICH ONE GOES TO BALANCE SHEET ?

Question: you say that Bad debts is an expense and we all know that expenses decrease owners equity, why question is why then did you debit bad debts account ? I am confused

Can you do a journal entry to show how we would show the 20,000 for the end balance in the allowance for doubtful accounts. Like I have a question that ask for the year-end adjusting entries to provide for the write-offs and to bring the balance of the AFDA account to the required balance as at Dec 31. I understand the write off journal entry is Debit to allowance for doubtful accounts and credit accounts receivable and to show the bad debt amount we do a separate journal entry where we debit bad debt expense and credit allowance for doubtful accounts but is there a seperate journal entry to show the ending balance for the allowance for doubtful accounts that I can see in the T-account?

Really thank you sooooo much you make me understanding

video pace is a bit slow... but info is great! i understand the concept better now!

Thank you! It is a great video. It's clear and easy to understand.

Many Thanks . It is very helpful vedio. Appericiate your efforts . Could you tell me , what about the direct write off methd

Thaanks a million for this , i legit tried to figure this out for a whole a week and it didn't work

Thank you very much for this, I was only able to understand it after your explanation thank you so much.

hi Kristin: thanks it's great explanation. I am just a bit confused about $8000 . why do we have $20000 in account and $8000 in another? please

Thank you. Do you reverse the bad debt expense if not used by year end (12/31/xx)?

Question: What happens when i have a write off? how will it affect my allowance for doubtful accounts?

amazing, this made so much sense to me and I have my final on Wednesday :) thank you so much!

What happens if my bad debt expense is a negative number when using the 2nd method?

This is beautiful