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3 Things To Know About Bad Debt
3 Things To Know About Bad Debt The Financial Dictionary defines Bad Debt as “Debt from a credit sale that the creditor is unable to collect. Debt becomes bad debt when the creditor has made all reasonable efforts to collect the debt but has been unable to do so. Often, this occurs when the debtor declares bankruptcy or when pursuing collection attempts further will cost more than the debt itself. A company writes off bad debt as an expense, which reduces its taxable income. However, it also deprives the company of cash flow that is ultimately necessary to keep it in business” For financial institutions bad debts are debts from bank asset (money borrowed to customers) that the customer is unable or unwilling to pay back or fulfill repayment obligations for a particular period of time often over 9 month. It mean collections for up to 9 months remain unpaid or uncollected. Such debt becomes bad debt and it is written off against the banks books. Here Are 3 Things To Know About Bad
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