Bad debt provision

Updated: Aug 20, 2021

A statement in the accounts of a creditor of the extent to which it expects to have to write off bad debts, that is, to cease to record them as assets in its accounts. A firm with bad debts must eventually decide to write them off. If it has numerous debtors that may not make the payments promised, it is possible to make a ‘bad debt provision’, naming an amount by which it expects to iiave to write off bad debts, without the need to specify which particular debts will become bad.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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James Knight
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James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.