How to calculate doubtful debts

How to calculate doubtful debts

There are different ways, it just depends on how your company computes it.

One way is a flat dollar amount and another way is a percentage of sales or a percentage of accounts receivable.

You can go by past experience and determine what percentage of sales or receivables balance has been shown to be bad, you can use industry averages or you can just quess according to recent experience, such as treating everything over 90 days as bad.