Hi there, I am doing a Budgeted Income Statement. If there is a percentage of credit sales that will not be received therefore bad debts, should this be shown. From my readings, I understand that this will decreased the projected funds coming into the business, so I assume that they would have to be calculated.

If it does, does it come off the Sales figure as in a cost of sales, which would thereby reduce the gross profit; OR
Does it come off the operating expenses - I think no, however obviously could be wrong.

I would appreciate thoughts in relation to this.

Thanks

Provision for Bad Debts is not part
Of the Trading Account.
It is another operating expense , budgeted for in the Profit and Loss Account.