What is bad debts?

Definition of Bad Debts

The term bad debts usually refers to accounts receivable (or trade accounts receivable) that will not be collected. (Bad debts is also used for notes receivable that will not be collected.)

The bad debts associated with accounts receivable is reported on the income statement as Bad Debts Expense or Uncollectible Accounts Expense.

Examples of Recording Bad Debts

There are two methods for recording the bad debts associated with accounts receivable: