Differentiating Between Bad Debt Expense and Allowance for Doubtful Accounts

Bad debt expense represents the actual amount of accounts receivable deemed uncollectible and written off during a period. Conversely, the allowance for doubtful accounts is a contra-asset account that estimates the portion of accounts receivable that may become uncollectible in the future. While bad debt expense reflects realized losses, the allowance for doubtful accounts anticipates potential losses and is reported on the balance sheet.

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