Allowance for Doubtful Accounts Calculator

About this calculator

Under U.S. GAAP (and the CECL standard, ASC 326), companies can't wait until a customer actually defaults to record the loss — they must estimate uncollectible receivables in advance and book a contra-asset called the allowance for doubtful accounts, most simply calculated as accounts receivable × estimated uncollectible rate (a flat percentage-of-sales or percentage-of-receivables method; more sophisticated shops age receivables by how overdue they are and apply different rates per bucket).

Subtracting that allowance from gross receivables gives the net realizable value — the amount management genuinely expects to collect — which is the figure that appears on the balance sheet rather than the full invoiced total. This matters for both external reporting accuracy and internal decisions like extending further credit to slow-paying customers.