USA Bad Debt Expenses

[Olive Oil]

When do bad debt expenses get booked into contra revenue vs OPEX?

 

[Drmdcpa]

Depends on the method used. Direct vs indirect.

 

[Olive Oil]

Depends on the method used. Direct vs indirect.

Could you please explaine

 

[Drmdcpa]

Direct method recognizes bad debt expense when the customer account is determined to be uncollectible.

Indirect or allowance method recognizes bad debt expense when it is making adjusting journal entries usually at the end of a time period. Under this method a particular customer account being written off does not effect bad debt expense since bad debt expense is estimated through adjusting journal entries.