where is bad debt expense reported 
bad debt expense is reported within the selling general and administrative expense section of the income statement however the entries to record this bad debt expense may be spread throughout a set of financial statements the allowance for doubtful accounts resides on the balance sheet as a contra asset meanwhile any bad debts that are directly written off reduce the accounts receivable balance on the balance sheet the bottom linebad debt expense is a natural part of any business that extends credit to its customers because a small portion of customers will likely end up not being able to pay their bills a portion of sales or accounts receivable must be ear marked as bad debt this small balance is most often estimated and accrued using an allowance account that reduces accounts receivable though a direct write off method which is not allowed under gaap may also be used 