A bad debt is an amount owed to a business or individual that is written off by the creditor as a loss (and classified as an expense) because the debt cannot be collected and all reasonable efforts to collect it have been exhausted. This usually occurs when the debtor has declared bankruptcy or the cost of pursuing further action in an attempt to collect the debt exceeds the debt itself.
The debt is immediately written off by crediting the debtor's account, eliminating any balance remaining there. The crediting represents a loss to the creditor.
Read more about Bad Debt: Doubtful Debt, Doubtful Debt Reserve, US Accounting Practice, Taxability, Mortgage Bad Debt
Famous quotes containing the words bad and/or debt:
“Even bad books are books and therefore sacred.”
—Günther Grass (b.1927)
“I have been told, that in some public discourses of mine my reverence for the intellect has made me unjustly cold to the personal relations. But now I almost shrink at the remembrance of such disparaging words. For persons are love’s world, and the coldest philosopher cannot recount the debt of the young soul wandering here in nature to the power of love, without being tempted to unsay, as treasonable to nature, aught derogatory to the social instincts.”
—Ralph Waldo Emerson (1803–1882)