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Alphabet Inc. (GOOG)
Analysis of Bad Debts
Difficulty: Advanced
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company’s gross accounts receivable.The relationship between the allowance and the balance in receivables should be relatively constant unless there is a change in the economy overall or a change in customer base.
Receivables Accounting Policy
Accounts Receivable
Alphabet records accounts receivable at the invoiced amount. Alphabet maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. Alphabet reviews the accounts receivable by amounts due from customers that are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, Alphabet makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations.
Source: 10-K (filing date: 2019-02-05).
Allowance for Doubtful Accounts Receivable
Based on: 10-K (filing date: 2019-02-05), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-09).
2018 Calculations
1 Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts and sales credits ÷ Accounts receivable, gross
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Allowance as a percentage of accounts receivable, gross | Allowance for doubtful accounts divided by the gross accounts receivable. | Alphabet Inc.’s allowance as a percentage of accounts receivable, gross increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |