allowance for doubtful accounts

(redirected from Loan-Loss Reserve)

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 ?
IFRS 9 requires deduction of expected as well as incurred credit losses from most loans, and Moroccan banks have limited capacity to absorb the impact, given their relatively weak capital buffers and loan-loss reserve coverage.
The Financial Strength Rating (FSR) is affirmed at 'A+,' supported by the Bank's strong asset quality (including high loan-loss reserve coverage), continued growth in customer deposits (contrary to the sector trend), and the Bank's historically strong franchise in the kingdom.
That money goes into the loan-loss reserve account at the financial institution," Deanda explained.
Eugene-based LibertyBank has reported its first negative earnings quarter in at least 10 years, citing a need to shift $6 million into its loan-loss reserve to account for construction loans that could go bad in Oregon's softening housing market.
These expenses accumulate on the bank's balance sheet in the loan-loss reserve account.
Under, a new loan-loss reserve agreement between FedNor and Northern Ontario credit unions, high-risk businesses in the North will be given access to the capital and consulting services they need to either get a new business off the ground or to expand an existing enterprise.
ln the absence of a market, the loan-loss reserve is designed to help customers through bad times.
"The Bank also has low non-performing loans (NPLs) and CI notes that the loan-loss reserve coverage ratio is strengthening.
Mainly reflecting Absa's lower asset quality in terms of both higher non-performing loans and reduced loan-loss reserve coverage of non-performing loans, in common with its competitors, CI downgrades Absa's Financial Strength Rating to 'BBB+' from 'A-'.
In the first quarter of 2009, Arkansas banks collectively had a loan-loss reserve ratio of 1.65 percent, up from 1.60 percent in the first quarter of last year.
In the first quarter of 2007, Arkansas banks collectively had a loan-loss reserve ratio of 1.38 percent, down from 1.45 percent for the same period in 2006.