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Bad Debt |
Also found in: Dictionary/thesaurus, Medical, Legal, Wikipedia, Hutchinson | 0.26 sec. |
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Bad debt A debt that is written off and deemed uncollectible. Bad Debt Debt from a credit sale that the creditor is unable to collect. Debt becomes bad debt when the creditor has made all reasonable efforts to collect the debt but has been unable to do so. Often, this occurs when the debtor declares bankruptcy or when pursuing collection attempts further will cost more than the debt itself. A company writes off bad debt as an expense, which reduces its taxable income. However, it also deprives the company of cash flow that is ultimately necessary to keep it in business. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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The inference is that, had the taxpayer specifically identified an allowance account (or portion thereof) as offsetting the bad debt in question--as in Brandtjen & Kluge, Inc. It is far more expensive to write off a bad debt than it is to pay for trade credit insurance, which generally costs less than 1 percent of sales, according to research from Marsh. said its fourth-quarter charges may exceed $1 billion and its loss from continuing operations will widen from the third quarter because of bad debt. |
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