Percentage-of-Receivables Basis Meaning

Accounting glossary · Understand, connect, apply

The percentage-of-receivables basis estimates the required ending allowance by applying a loss percentage to receivables, sometimes through an aging analysis.

Example

Receivables of $20,000 at an illustrative 3% expected loss imply a $600 target allowance. With an existing $150 credit allowance, the adjustment is $450.

Remember the difference

The percentage must be supported, not arbitrary. Applicable expected-credit-loss standards may require additional forward-looking information.

Browse the accounting glossary → · Follow a learning path

Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.

Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.

← Return to the accounting glossary