Bad debt

Tax Glossary Definition

Bad debt

Bad Debt – An amount owed to a business that is considered irrecoverable after all reasonable collection efforts have been exhausted. Such debts are recognized as losses and removed from the books through a write-off in the financial statements.

Example: When a debtor fails to pay ₹50,000 for goods sold on credit and recovery proves impossible, the amount is recorded as a bad debt expense.

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