A debt that is not collectible and therefore worthless to the creditor. This occurs after all attempts are made to collect on the debt. Bad debt is usually a product of the debtor going into bankruptcy or where the additional cost of pursuing the debt is more than the amount the creditor could collect. This debt, once considered to be bad, will be written off by the company as an expense.
Most companies make sales on credit as it generally allows them to increase their sales, even though some sales are to customers with less than desirable credit. Companies that do make credit sales will estimate the amount of sales they expect to lose to bad debt, which is found in the allowance for doubtful accounts.
A debtor with a history of bad debts will see their credit rating decline, which makes it difficult for the debtor to access any additional form of credit.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
bad debt — see debt Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. bad debt I … Law dictionary
bad debt — bad debts N COUNT A bad debt is a sum of money that has been lent but is not likely to be repaid. The bank set aside ₤1.1 billion to cover bad debts from business failures … English dictionary
bad debt — n a debt that is unlikely to be paid … Dictionary of contemporary English
bad debt — ► NOUN ▪ a debt that cannot be recovered … English terms dictionary
bad debt — noun count money that someone owes but will never pay … Usage of the words and phrases in modern English
Bad debt — A bad debt is an amount that is written off by the business as a loss to the business and classified as an expense because the debt owed to the business is unable to be collected, and all reasonable efforts have been exhausted to collect the… … Wikipedia
bad debt — noun a debt that is unlikely to be repaid • Hypernyms: ↑debt * * * bad debt noun A debt that cannot be recovered and is therefore written off as a loss • • • Main Entry: ↑bad bad debt A debt of which there is no prospect of payment • • • Main… … Useful english dictionary
bad debt — A debt that is written off and deemed uncollectible ( uncollectible account). Bloomberg Financial Dictionary * * * bad debt bad debt ➔ debt * * * When a business recognizes that a debt is unlikely to be repaid, the debt is written off as an… … Financial and business terms
bad debt — An uncollectible debt. A debt which may be deducted from gross income in determining income subject to tax. Anno: 39 ALR2d 898. A debt which is worthless because, in the exercise of sound business judgment, there is no likelihood of recovery… … Ballentine's law dictionary
bad debt — UK / US noun [countable] Word forms bad debt : singular bad debt plural bad debts business money that someone owes but will never pay … English dictionary