BAD DEBT EXPENSE

An entry found on a business's income statement that represents the amount of noncollectable accounts receivable that occurs in a given period. In terms of accounting entries, every time an amount increases bad debt expense, an equivalent amount is credited to the business's allowance for bad debts.

Often times, bad debt expenses occur as a result of a customer being unable to fulfill its obligation to pay an outstanding debt, due to bankruptcy or other financial problems. However, this does not always necessarily mean that the entire amount owed will be written off. Bankruptcy proceedings may be able to provide some recourse and remove some of the bad debt expense.