What is Bad debt?
Bad debt: Money a customer owes that will probably never be paid.
Where Bad debt fits
Bad debt is part of Receivables & Audits in Accounting. Receivables are what customers owe you; payables are what you owe suppliers. An audit independently checks the books, and a budget plans income and spending.
Practical tip
Chase receivables early and compare budgets with real results.
Related terms
- Accounts receivable
- Money customers owe you for goods or services already delivered.
- Accounts payable
- Money your company owes suppliers for things already received.
- Audit
- An independent check that financial records are accurate.
- Tax deduction
- An expense you can subtract to lower taxable income.
- Budget
- A plan for how much money you expect to earn and spend.
- Ledger
- The book that records all of a company's accounts and transactions.
Formulas you will use with it
Test yourself
Which term means: “Money a customer owes that will probably never be paid.”?
Budget · Accounts receivable · Bad debt
Answer: Bad debt
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