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How to Calculate Bad Debt Expense.
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How to Calculate Bad Debt Expense.

Rosemary Njeri

Bad debt is an expense that a business incurs once the repayment of credit previously extended to a customer is estimated to be noncollectable.

A bad debt expense is recognized when a receivable is no longer collectible because a customer is unable to fulfill their obligation to pay an outstanding debt due to bankruptcy or other financial problems.

Formula to calculate bad debt expense.

Calculate Bad Debt Expense.

Example:

Suppose a company sold goods worth $100,000 0n credit. Assuming that 2% of sales are not collectible. Determine the bad debt expense.

Calculate Bad Debt Expense.

Therefore, the company’s bad debt expense is $ 2,000.

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