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 ?
Proportionally, no other Arkansas bank committed more to its loan loss reserves during the first quarter than DeWitt Bank & Trust.
Loan quality continues to improve as the bank's total loan loss reserves skyrocketed from KD 32.
Aside from keeping the NPL ratio low, the banks also set aside substantial reserves for potential credit losses," the BSP pointed out, citing that the banks' loan loss reserves at end-2013 stood at 67.
Operating income before allocating possible loan loss reserves climbed by 3.
The results included a pre-tax addition of about USD305m to its loan loss reserves.
The anticipated losses were recorded as loan loss reserves for buildings including 1330 Avenue of the Americas, which Macklowe currently owns, and 527 Madison Avenue, which Macklowe sold, the filings show.
31, Pacific Continental increased its loan loss reserves to cover the default of loans on motels in Tillamook and Garibaldi.
Mori made the comment in reference to the IMF's using calculations by analysts of Japanese banks' bad loans and an additional amount of loan loss reserves.
Are banks with generous loan loss reserves practicing conservative accounting or earnings manipulation?
If examiners were being unusually strict in the amount of loan loss reserves they required of New England and California banks, the ratio for these banks should have exceeded that of the average U.
Nor should we forget the punitive instincts of savings and loan examiners, whose passion for requiring the setting up of loan loss reserves is likely to be rekindled if the economy turns down.
Banks increased loss provisions more than net charge-offs and ended the year with somewhat higher loan loss reserves (chart 2).