allowance for doubtful accounts

(redirected from Provision for Bad Debts)
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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 ?
Before giving effect to the increase in the provision for bad debts discussed above, income from continuing operations increased 11.
SHARES in online bank Egg have fallen 2pc after a rise in its provision for bad debts took the shine off rising profits at its core UK business.
The problems: slack growth in the ultra-competitive retail market and an increased provision for bad debts.
Based on this review, the Company recorded an increase to its allowance for doubtful accounts and changed its methodology for estimating its provision for bad debts and the related allowance for doubtful accounts effective September 30, 2006.
Lloyds also unveiled plans to cull 5,000 jobs and reported a higher provision for bad debts as shares slumped 40.
GHS' depressed operating profitability reflects flat utilization trends and increased growth of expenses, particularly labor and provision for bad debts.
The net increase in the provision for bad debts was USD 7.
4% from fiscal 2001-2003 and reflects increased growth of expenses, particularly labor, provision for bad debts, and supplies.
HRMC's expense growth in 2004 was driven by labor and provision for bad debts.
Included in YTD operating expenses is a $500,000 provision for bad debts related to the cancelled HDTV broadcast truck.
The audit adjustments were largely attributed to an understatement of contractual allowances ($9 million), and an increase in provision for bad debts related to reimbursement from a Blue Cross contract ($1.
The operating loss for the current year resulted from higher labor costs, increased insurance and physician guarantee expenses and higher provision for bad debts in the current year.