Bad Debts


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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.

Bad Debts

Business accounts receivable that have been included in income in a prior year that are uncollectible, legally binding debts owed to the taxpayer that are totally worthless and uncollectible, and debts the taxpayer must pay that he or she guaranteed in connection with his business or for a profit may be deductible as bad debts.
References in periodicals archive ?
Careful tax planning that maximizes the business bad debt deduction can help minimize the taxpayer's overall economic loss.
NBE's bad debts portfolio shrank during fiscal year 2011-2012,amounting to approximately EGP 6.1 billion after the bank settled EGP 1.7 billion bad debts, Abou El-Fotouh said.
Lloyds said high levels of bad debt "partly" took the shine off otherwise strong growth in its UK retail banking division.
The cash set aside to cover bad debts and extra investment in the business wiped out strong growth in Barclaycard's UK and overseas revenues.
Much of the pounds 1billion figure came from Barclay-card, where charges on bad debts rose by more than a third to pounds 696million.
The Norwegian savings bank Aurskog Sparebank (OSE: AURG) reported on Thursday (3 February) an operating profit before bad debts of NOK50.5m on net interest income and credit commissions of NOK69m for the financial year January-December 2004.
has sued the state Department of Finance and Administration, saying it should be reimbursed for the taxes because state tax 'law says the tax portion of bad debts is refundable, according to records filed in Pulaski County Circuit Court.
Keep in mind that bad debts don't disappear from your credit once they have been paid.
Nobody knows how big the Japanese banks' bad debt problems really are (including the banks themselves), but one thing is clear: Writing off such "nonperforming" loans will mean closing many businesses and prolonging the recession, thus adding to the mountain of bad debts.
However, many economists believe that Japan's bad debts are actually far higher, and may total more than $1 trillion.
Non-performing loans held by Thai financial institutions sharply declined in December to 17.9% of total outstanding debts, but new concerns have been raised bad debts amid uncertainty over the new government's planned national asset management company, a private research house said Tuesday.