allowance for doubtful accounts

(redirected from Loan Loss Reserves)

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 ?
In addition, the company expects that the charge-off will result in an increase in the estimate of its allowance for loan loss reserves recorded against the remaining asset-based lending portfolio in an amount up to approximately $2.7M as a result of higher loss factors being incorporated into the company's allowance for loan loss reserve methodology for the three months ended September 30, 2018.
The $118.7 million-asset lender's allocation of the equivalent of 6.63 percent of total loans to its loan loss reserves ranked the highest among 104 banks.
Loan quality continues to improve as the bank's total loan loss reserves skyrocketed from KD 32.6 million to KD 41.9 million, an increase of 29%, Gulf Bank's Chairman Omar Al-Ghanim said in a press statement.
Balla, Eliana and Andrew McKenna, "Dynamic Provisioning: A Countercyclical Tool for Loan Loss Reserves," FRB-Richmond Economic Quarterly, Fall 2009, Volume 95 (4), Pages 383-418.
coverage of impaired large corporate loans by loan loss reserves was
Loan loss reserves remained more than enough to cover for all NPLs, the BSP said.
According to the firm, the improvement in profitability during 2Q14 primarily reflected the recapture of loan loss reserves of USD 500,000 and an increase of USD 147 thousand in net interest income before recapture of loan losses, which were partially offset by a decrease of USD 190,000 in non-interest income and an increase of USD 171,000 in non-interest expense.
The improvement in profitability during the second quarter of 2014 primarily reflected the recapture of loan loss reserves of USD500,000 and an increase of USD147,000 in net interest income before recapture of loan losses, which were partially offset by a decrease of USD190,000 in non-interest income and an increase of USD171,000 in non-interest expense.
In December last year, the banks loan loss reserves stood at 67.58 percent of their gross NPLs, higher than the 66.10 percent posted a quarter earlier.
The sector's loan loss reserves, however, went down to 69.90 percent compared to the previous year's 71.85 percent.
A July 27 story in the Business section incorrectly stated that the bank had $950 million in loan loss reserves, up $150 million.
In response, lenders increased their loan loss reserves, especially agricultural banks.