Is bad debt a loss or expense?

[charlie]

I’m a bit confused about how to classify bad debt in accounting. Some sources say it’s an expense because it’s part of the cost of doing business, while others call it a loss since the money can’t be recovered. Which is the correct way to treat bad debt, and how do you record it properly in financial statements? Anyone with accounting experience, please share your insights!

 

[Samuel]

Bad debt is recorded as an expense, not a direct loss. It appears on the income statement as bad debt expense, reflecting amounts a business does not expect to collect from customers. However, it ultimately reduces profit, so in economic terms it represents a loss to the company.

 

[Lily]

Bad debt is recorded as an expense on the income statement, as it represents the cost of uncollectible accounts receivable. While it is ultimately a loss, the term "expense" is used in accounting to reflect the cost incurred in the current period, aligning with the matching principle

 

[tonny]

Bad debt is treated as an expense in accounting because it represents the portion of receivables a business does not expect to collect. However, it ultimately results in a loss of revenue. So, it is recorded as an expense (Bad Debt Expense) but reflects a loss to the business.

 

[Shane Warne]

Bad debt is when you have provided the credit or anticipated payment, which becomes unpayable. In accounting it is charged to an expense (bad debt expense) on the income statement and also decreases the accounts receivable line on the balance sheet, thus yes it is treated as an expense of the period in which the debt was uncollectible.

 

[Sophie]

Bad debt is charged against the income statement since it denotes money which a business cannot collect. In the long run, it is a loss because it minimizes the profits.

 

[Lucas]

Bad debt is treated as an expense in accounting because it represents money you expected to receive but can’t recover.
It appears on the income statement as a normal business expense.