Bad Debt Expense

Definition

The amount a company estimates it won't collect from accounts receivable—basically, money that looked real but was actually fiction.

Example Usage

We recorded a bad debt expense of $50,000 for customers who declared bankruptcy.

Origin

Accounting convention to match revenue with realistic collection expectations

Fun Fact

Companies use aging analysis and historical data to estimate bad debt, but it's still just educated guessing.

Source: Standard accounting practice

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