allowance for doubtful accounts

(redirected from Provisions for Bad Debts)

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 ?
Global Banking News-August 19, 2015--Heartland to make bigger provisions for bad debts
2 million net profit for 2014 despite the rise in provisions for bad debts.
In the quarter ended December 31, 2013, the bank s provisions for bad debts and non-performing assets stood at ?
90), following indications from Emirates NBD management that inflated provisions for bad debts may be required.
The group was helped by a 35% reduction in provisions for bad debts to pounds 359m, and a cost-cutting drive saving around pounds 5m.
The group was helped by a 35% reduction in provisions for bad debts to pounds 359 million, as well as a cost-cutting drive saving around pounds 5 million.
MUMBAI: ICICI Bank, India's second-biggest lender, said third-quarter profit rose 31 per cent to a record as loans increased and provisions for bad debts declined.
If a loan is not paid, they have provisions for bad debts and insurance coverage.
The mutual's pre-tax profits for the year to April 4 were down by 69% at pounds 212m as provisions for bad debts rose sharply to pounds 394m.
Bahrain Islamic Bank (BIsB) board chairman Khalid Abdulla Al Bassam said the bank continues to pursue its conservative policies and complies with the directives of the regulatory authorities by setting aside more provisions for bad debts and finance transactions, especially those related to the Saad and Algosaibi Groups.
It said provisions for bad debts had risen sharply to Au394 million.
Nationwide's pre-tax profits for the year to April 4 were down 69%, at pounds 212m, as provisions for bad debts rose sharply to pounds 394m.

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