Dangling Debit

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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. How do you calculate credits and debits in the general ledger?

    A general ledger acts as a record of all accounts and their transactions. Balancing the ledger involves subtracting the total ... Read Full Answer >>
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