allowance for doubtful accounts

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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 ?
Hertz further disclosed that the planned restatement is due to errors relating to, among other items, the capitalization and timing of depreciation for certain non-fleet assets, allowances for doubtful accounts in Brazil, allowances for uncollectible amounts with respect to renter obligations for damaged vehicles, and restoration obligations at the end of facility leases.
Further, the B3 rating reflects the risks related to the company's financial reporting including allowances for doubtful accounts and related party transactions," Moody's said.
Excluding charges for reorganisation and allowances for doubtful accounts worth 13 cents per share, Baker Hughes earned 31 cents a share.
that exhibit markedly different historical patterns in the estimation and use of their allowances for doubtful accounts.
Specifically, it is claimed that FEED and the other defendants misrepresented and/or failed to disclose the following adverse facts: (i) AgFeed's collection efforts and credit dealings with its animal nutrition customers were not working because the "formula based analysis" AgFeed relied on in determining accounts receivable and reserves for doubtful accounts was flawed; (ii) allowances for doubtful accounts were undervalued; (iii) accounts were overvalued and bad debts were undervalued, causing reported asset values to be overstated and expenses to be understated; and (iv) as a result, AgFeed exaggerated its market edge creating an illusion of heightened profitability.
Irregnlarities in AM's sales revenue recognition were pointed to, along with an understatement of allowances for doubtful accounts, AM's failure to disclose certain accounting changes having a material effect on the financial statements and other alleged violations of generally accepted auditing standards and generally accepted accounting principles.
Domestic Brokerage Group ("DBG") Issues - A review of allowances for doubtful accounts and other accruals recorded by certain DBG member companies has led AIG to conclude that the allowances related to certain premiums receivable, reinsurance recoverables and other assets were not properly analyzed in prior periods and the appropriate allowances were not properly recorded in the consolidated financial statements.
Specifically, Defendants incorrectly reported Topaz' financial position by, inter alia: overstating inventory, understating allowances for doubtful accounts and improperly recognizing revenue.
The Company maintains allowances for doubtful accounts for estimated losses resulting from payers' inability to make payments on accounts.
The increase in costs was primarily due to charges totaling $950,000 for increases in allowances for doubtful accounts, professional and legal fees.
The complaint says the company recently acknowledged that it had overstated revenues and understated allowances for doubtful accounts.
The action charges that the Company recently acknowledged that revenues were overstated and allowances for doubtful accounts were understated.