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Also known as a bad debt reserve, this is a contra account listed within the current asset section of the balance sheet. The doubtful debt reserve holds a sum of money to allow a reduction in the accounts receivable ledger due to non-collection of debts. This can also be referred to as an allowance for bad debts.
A third classification of adjusting entry occurs where the exact amount of an expense cannot easily be determined. The depreciation of fixed assets, for example, is an expense which has to be estimated. The entry for bad debt expense can also be classified as an estimate.
Bad debt often includes financial burdens like a high-interest credit card that you constantly carry a balance on, an auto loan with a lengthy term or a store credit card that could tempt you to ...
Contra-accounts are accounts with negative balances that offset other balance sheet accounts. Examples are accumulated depreciation (offset against fixed assets), and the allowance for bad debts (offset against accounts receivable). Deferred interest is also offset against receivables rather than being classified as a liability.
The word "debt" has all kinds of negative connotations -- and with good reason. Carrying a heavy debt load not only jeopardizes your financial security, but it can also lead to everything from ...
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A fixed liability is a debt, bond, mortgage or loan that is payable over a term exceeding one year. Such debts are better known as non-current liabilities [1] or long-term liabilities. [2] Debts or liabilities due within one year are known as current liabilities. [3]
Good debt vs. bad debt. Ramsey and Stephan have similar views on what they consider to be “bad debt” — or debt used for consumption. Ramsey once said on his own show, ...