bad debt reserve


An amount set aside as reserve for bad debts. In general, companies make an estimate of bad debt expenses that might be incurred in the current time period based on past records as part of the process of estimating earnings. Most companies keep a bad debt reserve in the expectation that some small percentage of their creditors will not pay them in full. If the bad debt reserve is accurately estimated, then a company's net income will not be reduced when the debts are actually written off as being uncollectable.

Use bad debt reserve in a sentence

You should always make sure that you have enough set aside to cover any bad debt reserve you might have.

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As the company knows that not all debtors will pay in full the wisely set money aside in a bad debt reserve to cover the eventual losses.

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With the amount of bad debt reserve my company is building I think I will dust off my resume just in case it is a precursor for things to come.

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bad debt provision reserve