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 ?
15 from funds that were previously available from the borrower ($2.3 million) and from monies in the debt service reserve accounts ($1.6 million).
Banks maintain reserve accounts to offset losses they incur on defaulted loans.
Elsewhere, as an interim measure to stave off a liquidity crunch, the Company procured bank guarantees (BG) amounting to MYR 90 million on 27 January 2015 to substitute the cash reserves in its finance service reserve accounts (FSRAs).
Premium stabilization reserves are an actual plan liability, rather than a contingent liability; this results from agreements between the plan and participating employers, in which the plan is obligated to refund the positive balance in the premium stabilization reserve accounts to the participating employers, upon their request, through a premium holiday, a reduction in the premium rate, or the transfer to a successor trust.
As the Legislature prepared the current budget, many members advocated increasing spending for schools and other services by allocating less to the state's reserve accounts. The last two revenue forecasts have validated the wisdom of funding the reserves.
The shareholders have approved the transfer of LBP41.2bn of the 2010 net profit to various reserve accounts and LBP28.9bn to retained earnings, the bank said.
It seems no one is sure who first uttered the old wisecrack "Light dawns on Marblehead," but it seems that light has finally begun to dawn on Beacon Hill, as well, with talk that the state should devise a mechanism to divert more of its capital gains tax revenue into reserve accounts as a way of tamping down the volatility that comes with economic booms and busts.
In addition, Japanese corporations have more reserve accounts than those of any other country in the world.
Liverpool council revealed that it had clawed back the money from reserve accounts after losing patience with "hoarding" headteachers.
Considering an uncertain future, half the states have made deposits into reserve accounts. Experts warn states should be cautious as revenues are not expected to increase as much in the next year.
"Today, those who build new typically sell in five years, but with affordable properties, where limited partnerships and tax credits must be held for 15 years, and in many cases up to 30, it's important that reserve accounts be funded and maintained.
Carver will also have the opportunity to provide homebuyer financing for any new residential projects created in Upper Manhattan; to maintain operating and reserve accounts for multi-family dwellings; and to maintain lease security deposits for multifamily apartment and mixed-use buildings.