Bad Debt

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:

    A bad book is as much of a labour to write as a good one; it comes as sincerely from the author’s soul.
    Aldous Huxley (1894–1963)

    It is a well-settled principle of the international code that where one nation owes another a liquidated debt which it refuses or neglects to pay the aggrieved party may seize on the property belonging to the other, its citizens or subjects, sufficient to pay the debt without giving just cause of war.
    Andrew Jackson (1767–1845)