Definitions for "Allowance for Bad Debts"
A contra account, contains the estimate of the accounts receivable that are expected to become un-collectable during a fiscal period.
Amount of estimated debt to the business that is not expected to be repaid and is subtracted from accounts receivable on the balance sheet. Also known as an allowance for doubtful accounts. Back to main document.
Also called reserve for bad debts, it is an estimate of uncollectable customer accounts. It is known as a "contra" account because it is listed with the assets, but it will have a credit balance instead of a debit balance. For balance sheet purposes, it is a reduction of accounts receivable.