Editing Bad debt (section)

==Doubtful debt==
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Doubtful debts are those debts which a business or individual is unlikely to be able to collect. The reasons for potential non-payment can include disputes over supply, delivery, the condition of the item, or the appearance of [[Stress testing#Financial sector|financial stress]] within a customer's operations. When such a dispute occurs, it is prudent to add this debt or portion thereof to the doubtful debt reserve. This is done to avoid over-stating the assets of the business as [[Debtor collection period|trade debtor]]s are reported net of doubtful debt.  When there is no doubt that a [[debt]] is uncollectible, the debt becomes bad. An example of a debt becoming uncollectible would be: once final payments have been made from the [[liquidation]] of a customer's [[limited liability company]], no further action can be taken.<ref>{{Cite web|last=Bragg|first=Steven|title=The difference between bad debt and doubtful debt|url=https://www.accountingtools.com/articles/what-is-the-difference-between-bad-debt-and-doubtful-debt.html|access-date=2021-11-16|website=AccountingTools|language=en-US}}</ref>