Bad debt allowance, calculated your way each period
The allowance calculation pulls the aging, applies reserve rates, and layers on specific reserves that someone remembers from last quarter. Using your method and current receivables data, the Accounting Agent rebuilds that calculation every period and drafts the entry to true up the allowance.
What the Accounting Agent prepares
- The allowance calculation from the current AR aging, using your reserve rates by bucket or the method you already use
- Specific reserves for the accounts you identify, carried forward until you release them
- An allowance roll-forward: opening balance, provision, write-offs, recoveries, closing balance
- A drafted true-up entry to bad debt expense and the allowance account
- Support linking each figure to the aging report and customer detail
How it works
- Pull the data. The Accounting Agent pulls the AR aging, write-offs, and the current allowance balance from your ERP.
- Prepare the work in your logic and format. It applies your reserve method, carries forward specific reserves, and builds the roll-forward in your working paper format.
- Review and approve. You review the calculation, adjust any specific reserve, and approve. The true-up entry posts to your ERP once you approve it.
What stays in your control
- Reserve rates, methods, and decisions on specific customers stay with your team
- The full calculation travels with the entry, which posts only after approval
- Every change to a rate or reserve is logged with who made it
Standard note
Under US GAAP, the allowance for credit losses on trade receivables falls under ASC 326 (CECL); under IFRS, it is measured with the expected credit loss model in IFRS 9.
FAQ
How is a bad debt allowance calculated?
Many teams apply reserve percentages to each aging bucket, adjusted for current conditions and reasonable and supportable forecasts, then add specific reserves for accounts known to be at risk. The Accounting Agent runs whichever method your team uses; it does not choose one for you.
Can the bad debt allowance entry be automated?
The calculation and the drafted entry can. The entry posts to your ERP only after a reviewer approves it, and the support stays attached to the task.
Does the Accounting Agent decide which customers to reserve?
No. Judgment on specific accounts stays with your team. The Accounting Agent applies the rules you set and flags accounts that meet your criteria for a closer look.
