Editing Bad debt (section)

{{short description|Debt which is unlikely to be repaid and which the creditor is unwilling to collect}}
{{for|the album by Hiss Golden Messenger|Bad Debt (album)}}
{{Globalize|article|USA|2name=the United States|date=May 2016}}

In [[finance]], '''bad debt''', occasionally called '''uncollectible accounts expense''', is a [[Debt|monetary amount owed]] to a [[creditor]] that is unlikely to be paid and for which the creditor is not willing to take action to [[debt collection|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]]. A high bad debt rate is caused when a business is not effective in managing its [[credit]] and [[Collections management|collections]] process. If the credit check of a new customer is not thorough or the collections team is not proactively reaching out to recover payments, a company faces the risk of a high bad debt. Various technical definitions exist of what constitutes a bad debt, depending on accounting conventions, regulatory treatment and institution provisioning. In the United States, bank loans with more than ninety days' [[arrears]] become "problem loans".<ref>{{cite book |chapter-url=http://www.oxfordreference.com/view/10.1093/acref/9780198294818.001.0001/acref-9780198294818-e-493 |chapter-url-access=subscription |chapter=Bad debt |title=The Handbook of International Financial Terms |year=1997 |access-date=6 June 2016 |last1=Moles |first1=Peter |last2=Terry |first2=Nicholas |isbn=9780198294818}}</ref> Accounting sources advise that the full amount of a bad debt be written off to the profit and loss account or a provision for bad debts as soon as it is foreseen.<ref name="oxdicacc">{{cite encyclopedia|dictionary=A Dictionary of Accounting|publisher=Oxford University Press|access-date=6 June 2016|date=January 2010|edition=4th|isbn=978-0-19-956305-0|entry-url=http://www.oxfordreference.com/view/10.1093/acref/9780199563050.001.0001/acref-9780199563050-e-347?rskey=ie8oiM&result=1|entry-url-access=subscription|entry=Bad debt}}</ref>