What is a bad debt?
Definition of bad debt:
When a debt is not collectable, it’s known as a ‘bad debt’. An example of when bad debt occurs would be if a debtor were to enter into bankruptcy.
Another example of bad debt would be if the cost of recovering a debt was larger than the debt total.
Bad debts can sometimes be written off as an expense on company income tax returns.
Go back to the main Accounting Glossary page.
