Doubtful Debt
Doubtful debts are those debts which a business or individual is unlikely to be able to collect. The reasons for potential non payment can include disputes over supply, delivery, at the conditioner of item or the appearance of financial stress within a customer's operations. When such a dispute occurs it is prudent to add this debt or portion thereof to the doubtful debt reserve. This is done to avoid over-stating the assets of the business as trade debtors is reported net of Doubtful debt. When there is no longer any doubt that a debt is uncollectible the debt becomes bad. An example of a debt becoming uncollectible would be:- once final payments have been made from the liquidation of a customer's limited liability company, no further action can be taken.
Read more about this topic: Bad Debt
Famous quotes containing the words doubtful and/or debt:
“Were it good
To set the exact wealth of all our states
All at one cast? to set so rich a main
On the nice hazard of one doubtful hour?
It were not good.”
—William Shakespeare (1564–1616)
“Live within your means, never be in debt, and by husbanding your money you can always lay it out well. But when you get in debt you become a slave. Therefore I say to you never involve yourself in debt, and become no man’s surety. If your friend is in distress, aid him if you have the means to spare. If he fails to be able to return it, it is only so much lost.”
—Andrew Jackson (1767–1845)