bad debt

Related Terms
Accounts receivable that is unlikely to be paid and is treated as loss. A firm may use one of the two methods in writing off such losses against its sales revenue: (1) by deducting the uncollectible amounts from revenue in the accounting period they are deemed uncollectible (see direct write off method), or (2) by deducting an estimated amount from revenue in each accounting period and adjusting any excess or shortfall in the following accounting period (see allowance method). The ratio of bad debt losses and the open account (credit) sales is an indicator of the quality of a firm's collectibles, and the efficiency of its credit monitoring efforts.
Also called uncollectible account.

Use 'bad debt' in a Sentence

Sometimes you just have to realize that what you have been waiting on is bad debt that will never get paid off.
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Sometimes you just have to give up on a bad debt and realize that you are never going to get what you are owed.
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We had a lot of bad debt and it made me think that we would not last much longer as a sustainable business.
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