allowance for doubtful accounts

(redirected from Bad Debt Provisions)

Allowance for Doubtful Accounts

Extra funds from sales, or another source, set aside in order to pay off bad debt if and when it arises. The allowance helps a company ward off any potential cash flow problems should its credit sales not be repaid as expected. On financial statements, it is important to note that an allowance for bad debts exists for fiscal conservatism and not because one expects a large amount of bad debt to accumulate. An allowance for doubtful accounts is also called a cushion. Banks call these funds the loan loss reserve. See also: Savings account.

allowance for doubtful accounts

A balance-sheet account established to offset expected bad debts. If a firm has made a sufficient provision in its allowance for doubtful accounts, reported earnings will not be penalized by bad debts when the bad debts occur. If uncollectible accounts are larger than expected, however, the firm will have to increase the size of the account and reduce reported income. Also called allowance for bad debts, reserve for bad debts.
References in periodicals archive ?
The bank said that its first quarter net profit dropped 16 per cent because of bad debt provisions.
1 billion gain from disposals aided earnings as did a halving of bad debt provisions to $1.
It is the second warning from Aggreko in as many months after it said in October that unfavourable currency movements and an increase in bad debt provisions would affect results for this year.
But it warned that results were being impacted by unfavourable currency movements and as bad debt provisions increased.
Greek banks are trying to cope with rising bad debt provisions and a shrinking deposit base as the austerity-hit country struggles through its fourth straight year of economic contraction.
Sorouh Real Estate reported a four-fold surge in second-quarter net profit as Abu Dhabi's second largest property developer handed over more units and saw a sharp drop in bad debt provisions, but the results missed analysts' forecasts.
Total operating costs, excluding bad debt provisions, were EUR8.
The result was burdened by bad debt provisions of EUR 1.
3 million last year after booking bad debt provisions totalling pounds 65.
The global bank wants the extra cash to shore up its finances after unveiling bad debt provisions totalling a massive 24.
It also saw a sharp rise in US bad debt provisions, leaving shares 3.
B&B said 6170 of their borrowers fell three months or more in arrears last year - 42 per cent up on 2006 - while bad debt provisions trebled to pounds 22.