Uncollectible accounts expense is the charge made to the books when a customer defaults on a payment. This expense can be recognized when it is certain that a customer will not pay. A more conservative approach is to charge an estimated amount to expense when a sale is made; doing so matches the expense to the related sale within the same reporting period, even though the precise nature of the default is not yet known.

Uncollectible accounts expense is also known as bad debt expense.

Presentation of Uncollectible Accounts Expense

The uncollectible accounts expense normally appears within the operating expenses section of an income statement, though it is most commonly presented as Bad Debt Expense. The presentation appears in the following income statement exhibit.