Bad debt refers to an amount owed to an individual or business written off as a loss by the creditor because it remains uncollected. Under the context of financial recording, bad debts fall to expense. This is a financial obligation which is not collectible, thereby causing the amount to be worthless to creditors. In most cases, this results after the debtor undergo bankruptcy. It also takes place when the additional expenses related to going after the amount is more than what the creditor can collect.
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