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Published On:Saturday, 7 January 2012
Posted by Muhammad Atif Saeed

Bad Debt

A debt that is not collectible and therefore worthless to the creditor. This occurs after all attempts are made to collect on the debt. Bad debt is usually a product of the debtor going into bankruptcy or where the additional cost of pursuing the debt is more than the amount the creditor could collect. This debt, once considered to be bad, will be written off by the company as an expense.


explains 'Bad Debt'

Most companies make sales on credit as it generally allows them to increase their sales, even though some sales are to customers with less than desirable credit. Companies that do make credit sales will estimate the amount of sales they expect to lose to bad debt, which is found in the allowance for doubtful accounts.

A debtor with a history of bad debts will see their credit rating decline, which makes it difficult for the debtor to access any additional form of credit.

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Posted by Muhammad Atif Saeed on 11:01. Filed under , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

By Muhammad Atif Saeed on 11:01. Filed under , . Follow any responses to the RSS 2.0. Leave a response

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I am doing ACMA from Institute of Cost and Management Accountants Pakistan (Islamabad). Computer and Accounting are my favorite subjects contact Information: +923347787272 atifsaeedicmap@gmail.com atifsaeed_icmap@hotmail.com

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