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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

Allowance for Doubtful Accounts

Apple records its allowance for doubtful accounts based upon its assessment of various factors, including historical experience, age of the accounts receivable balances, credit quality of Apple's customers, current economic conditions and other factors that may affect the customers' abilities to pay.

Source: Apple Inc., Annual Report

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Allowance for Doubtful Accounts Receivable

 
Sep 30, 2017 Sep 24, 2016 Sep 26, 2015 Sep 27, 2014 Sep 28, 2013 Sep 29, 2012
Selected Financial Data (USD $ in millions)
Allowance for doubtful accounts
Accounts receivable, gross
Ratio
Allowance as a percentage of accounts receivable, gross1 % % % % % %

Source: Based on data from Apple Inc. Annual Reports

2017 Calculations

1 Allowance as a percentage of accounts receivable, gross = 100 × Allowance for doubtful accounts ÷ 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. Apple Inc.'s allowance as a percentage of accounts receivable, gross declined from 2015 to 2016 and from 2016 to 2017.

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