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 ?
However, the ratings also reflect the fact that both banks are currently servicing their obligations and have reasonable liquidity cushions (larger at UTB).
Moody's however foresees that the increase is insufficient to alleviate businesses' foreign currency needs and covers less than one month of imports, so that banks' foreign currency liquidity cushions will continue to decline.
However, we estimate the increase is insufficient to alleviate businesses' foreign currency needs and covers less than one month of imports, so that banks' foreign currency liquidity cushions will continue to decline.
We estimate the increase is insufficient to alleviate the needs of business foreign currency and covers less than one month of imports, so banks' foreign currency liquidity cushions will continue to decline," Moody's said.
In addition, the action reflects the lender's modest presence on the Kazakh market but also capital and liquidity cushions and profitability that are in line with its rating level, the agency said.
The European Banking Federation estimates the new liquidity cushions could cost the sector up to 3 trillion, and has lobbied the Commission to temporarily shelve the introduction of binding limits.
We are learning the lessons of the crisis in requiring better capitalization for our banks and larger liquidity cushions, two essential elements for stronger stability in our financial system," EU Commissioner for Internal Market Michel Barnier said in a statement.
Financial soundness indicators constructed from individual bank balance sheets suggest that GCC banks remain well capitalised and profitable with system-wide capital and liquidity cushions that helped them weather the global financial turmoil better in 2009," said George Abed, IIF Senior Counsellor and Director of the Middle East-Africa Department.
Moody's recognises that BisB has demonstrated its capacity to weather the current financial stress, especially by maintaining ample asset liquidity cushions," Moody's lead analyst Anouar Hassoune said.
Nonetheless, Moody's recognises that BisB has demonstrated its capacity to weather the current financial stress, especially by maintaining ample asset liquidity cushions," Mr Hassoune said.
Fitch attributes this stability to conservative portfolio management practices exhibited by Fitch-rated prime MMFs, which are managed with substantial liquidity cushions relative to Fitch rating criteria and regulatory requirements.
Refinancing risks are moderate, given the limited reliance on wholesale funding, and liquidity cushions are comfortable, covering about 45% of sector deposits.