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Analysis of Bad Debts
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
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 by customers which 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. Alphabet also maintains a sales allowance to reserve for potential credits issued to customers. Alphabet determines the amount of the reserve based on historical credits issued.
Source: Alphabet Inc., Annual Report
Allowance for Doubtful Accounts Receivable
Source: Based on data from Alphabet Inc. Annual Reports
1 Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts and sales credits ÷ Accounts receivable, gross
= 100 × ÷ = %
|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 2015 to 2016 and from 2016 to 2017.|