Kraft Heinz Co. (KHC)
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.
Allowance for Doubtful Accounts Receivable
1 Allowance as a percentage of trade receivables, gross = 100 × Allowances related to trade accounts receivable ÷ Trade receivables, gross
= 100 × 24 ÷ 2,153 = 1.11%
|Allowance as a percentage of trade receivables, gross||Allowance for doubtful accounts divided by the gross accounts receivable.||Kraft Heinz Co.’s allowance as a percentage of trade receivables, gross declined from 2016 to 2017 and from 2017 to 2018.|