Allowance for Doubtful Accounts Estimation

Professional Guide

This task helps accountants estimate the allowance for doubtful accounts using an aging-based probability approach. Each receivable balance is multiplied by a predefined default probability based on aging buckets, producing an expected credit loss figure. This method aligns with modern expected credit loss frameworks and improves accuracy compared to flat-percentage estimates. The logic is transparent, auditable, and easy to adjust when risk assumptions change. It is especially useful during month-end close and audit preparation. The model can be expanded by customer segment or region, supporting scalable credit risk analysis across portfolios.