When does a receivable typically hit bad debt on the Income Statement?

A receivable typically hits bad debt on the Income Statement after 90 days because this timeframe is often considered the threshold for determining that an account may not be collectible. Businesses commonly assess the likelihood of collection based on the age of the receivable; as time passes without payment, the chances of recovery decrease.

After 90 days, many companies have policies in place that classify these receivables as uncollectible due to the increased risk associated with them being past due. This aging schedule helps organizations manage their finances by recognizing potential losses in a timely manner. Recording bad debt expense at this point also aligns with accounting principles that require a reflection of the company's true financial position, taking into account receivables that are unlikely to be collected.

In contrast, the other timeframes (30 days, 60 days, and 120 days) do not represent this standard practice for recognizing bad debt. Collectability considerations at earlier intervals often still assume a reasonable chance for payment, while receivables outstanding for longer than 90 days typically lead businesses to adjust their expectations concerning recoverable amounts.