Bad Debt Expense


DEFINITION of 'Bad Debt Expense'

An entry found on a business's income statement that represents the amount of noncollectable accounts receivable that occurs in a given period. In terms of accounting entries, every time an amount increases bad debt expense, an equivalent amount is credited to the business's allowance for bad debts.

BREAKING DOWN 'Bad Debt Expense'

Often times, bad debt expenses occur as a result of a customer being unable to fulfill its obligation to pay an outstanding debt, due to bankruptcy or other financial problems. However, this does not always necessarily mean that the entire amount owed will be written off. Bankruptcy proceedings may be able to provide some recourse and remove some of the bad debt expense.

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    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  3. Do dividends affect working capital?

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  4. Do prepayments provide working capital?

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  5. Does working capital include salaries?

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