Bad Debt Expense

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Bad Debt Expense

An item on a balance sheet indicating debt from a credit sale that the creditor is unable to collect. Debt becomes a bad debt expense when the creditor has made all reasonable efforts to collect the debt but has been unable to do so. Many companies set aside an allowance for bad debts to pay for bad debt expenses. While this helps, bad debt expenses still deprive a company of cash flow that is ultimately necessary to keep it in business.
References in periodicals archive ?
Lower bad debt expenses and better margins also contributed to the improved earnings.
Since 1994, bad debt expenses as a percentage of the receivable portfolio has remained constant.