Dangling Debit

AAA

DEFINITION of 'Dangling Debit'

A debit entry with no offsetting credit entry. Dangling debit occurs when a company purchases goodwill or services to create a debit. When adding the journal entry to financial statements a corresponding credit balance is not reported and cannot be written off. Dangling debit can be received when a company is acquired but is not recorded on the balance sheet.

INVESTOPEDIA EXPLAINS 'Dangling Debit'

When a company purchases goodwill, the company will receive a debit entry on its financial statements, but no entry is entered on the credit side and therefore a dangling debit is created. When a company uses dangling debit in their financial statements, it is offset by affecting the equity of the company by being listed as deductions or negative reserves.

RELATED TERMS
  1. Goodwill

    An account that can be found in the assets portion of a company's ...
  2. Financial Statements

    Records that outline the financial activities of a business, ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Journal

    1. In accounting, a first recording of financial transactions ...
  5. Credit

    1. A contractual agreement in which a borrower receives something ...
  6. Debit

    An accounting entry that results in either an increase in assets ...
Related Articles
  1. Spotting Companies In Financial Distress
    Personal Finance

    Spotting Companies In Financial Distress

  2. Credit, Debit And Charge: Sizing Up ...
    Credit & Loans

    Credit, Debit And Charge: Sizing Up ...

  3. A Fresh Look At The Financial Markets
    Investing Basics

    A Fresh Look At The Financial Markets

  4. Impairment Charges: The Good, The Bad ...
    Fundamental Analysis

    Impairment Charges: The Good, The Bad ...

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center