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. Debit

    An accounting entry that results in either an increase in assets ...
  5. Journal

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

    1. A contractual agreement in which a borrower receives something ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Personal Finance

    Spotting Companies In Financial Distress

    What are the warning signs that a company is struggling - or worse, sinking - financially? Read on to find out.
  2. Credit & Loans

    Credit, Debit And Charge: Sizing Up The Cards In Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  3. Investing Basics

    A Fresh Look At The Financial Markets

    Different markets provide unique opportunities and risks for investors. Find out more here.
  4. Fundamental Analysis

    Impairment Charges: The Good, The Bad And The Ugly

    Impairment charge is a term for writing off worthless goodwill, but you need to know what its potential impact is on EPS.
  5. Personal Finance

    Can You Count On Goodwill?

    Carefully examine goodwill and its sources before considering the value of your investment.
  6. Investing

    Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.
  7. Options & Futures

    Debit Spreads: A Portfolio Loss Protection Plan

    There are ways to control risks, reduce losses and increase the likelihood of success in your portfolio. Find out how spreads can help.
  8. Entrepreneurship

    Biggest Merger and Acquisition Disasters

    Find out which companies collapsed after merging.
  9. Bonds & Fixed Income

    Uncovering Hidden Debt

    Understand how financing through operating leases, synthetic leases, and securitizations affects companies' image of performance.
  10. Entrepreneurship

    The Impact Of Recession On Businesses

    Find out how this economic cycle affects both small and big business.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center