Search results
Results from the WOW.Com Content Network
In finance, bad debt, occasionally called uncollectible accounts expense, is a monetary amount owed to a creditor that is unlikely to be paid and for which the creditor is not willing to take action to collect for various reasons, often due to the debtor not having the money to pay, for example due to a company going into liquidation or insolvency.
The distinction is that while a write-off is generally completely removed from the balance sheet, a write-down leaves the asset with a lower value. [4] As an example, one of the consequences of the 2007 subprime crisis for financial institutions was a revaluation under mark-to-market rules: "Washington Mutual will write down by $150 million the ...
Removing bad debts from the ledger (Bad Debt Write-Offs). Setting credit limits. Setting credit terms beyond those within credit analysts' authority. Setting credit rating criteria. Setting and ensuring compliance with a corporate credit policy. Pursuing legal remedies for non-payers. Obtaining security interests where necessary.
The purpose of making such a declaration is to help support a tax deduction for bad debts under Section 166 of the Internal Revenue Code. In that respect it is a form of write-off. Bad debts and even fraud are simply part of the cost of doing business. The charge-off, though, does not free the debtor of having to pay the debt.
The second method is the direct write-off method. It is simpler than the allowance method in that it allows for one simple entry to reduce accounts receivable to its net realizable value. The entry would consist of debiting a bad debt expense account and crediting the respective accounts receivable in the sales ledger.
In this case a professional Debt collection agency may be hired along with attendant legal, court and other fees. This event is normally dreaded and most accountants are reluctant to consider that credit extended has now become non-collectable necessitating a debt write-off if the receivable has gone bust or a provision if only a lower amount ...
Get AOL Mail for FREE! Manage your email like never before with travel, photo & document views. Personalize your inbox with themes & tabs. You've Got Mail!
A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, [1] pronounced / ˈ iː b ɪ t d ɑː,-b ə-, ˈ ɛ-/ [2]) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.