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 ?
Firoz Tarapore, chief executive officer of DAE commented: "We continue to bolster our liquidity cushion to support our growth ambitions and opportunities.
Despite our expectation that the bank will partially use its sizeable liquidity cushion to finance future loan disbursements, we expect IaDB's liquidity profile to remain comfortably in excess of 1.5x, which is excellent, in our view.
Large government reserves -- in the form of Sovereign Wealth Funds (SWFs) -- offer support in times of distress and provide a liquidity cushion that can reduce default risk, which is considered a key differentiator from emerging market peers.
SandP's ratings on KDB Uzbekistan reflect its small lending franchise, stable depositor base, high liquidity cushion, and funding metrics that SandP sees as much stronger than those of peers.
Nikolay Kolesnikov, Senior Executive Vice-President, Chief Financial Officer of PAO Sovcomflot, said: The completion of this credit facility marks the successful finalisation of SCFs 2018 financing plan, with total new debt capital raised this year amounting to circa USD 900 million, which allows us to fully address the Groups mid-term financing requirements, to optimise and smooth-out its debt repayment profile, and to build up an additional liquidity cushion.
"In addition, according to its own disclosures following the spinoff, Talen had a $4 billion equity value with strong cash flows and ample liquidity cushion. It was significantly under-leveraged relative to its peers.
CBD has a large stock of liquid assets equivalent to 28 per cent of customer deposits, providing a good liquidity cushion and its gross loans to deposits ratio remains above peers, indicative of the banks relatively more diversified funding profile, said Fitch.
At least one or more of the new board members might advocate for GE to raise equity capital and provide for a more apt liquidity cushion given the company's "current cash squeeze and significant balance sheet risks," including $37B of long-term debt maturities at GE Capital over the next three years, Inch tells investors in a research note.
All of these transactions were initiated by SoftBank Group in order to generate proceeds that will be used to increase SoftBank's liquidity cushion, improve its leverage ratio and enable flexible and prudent financial management for SoftBank, Alibaba added.
It added however that it did acknowledge the bank's solid liquidity cushion and stronger capital.
high liquidity cushion, which compares favorably with those of its peers.
Improving the Government Development Bank's (GDB) liquidity cushion, and therefore that of the commonwealth, is a key consideration.