Definition of Allowance for Doubtful Accounts in Accounting

Accounting Definitions

Browse terms alphabetically

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Allowance for Doubtful Accounts Definition

Short Definition
The allowance for doubtful accounts (ADA) is a budget line item. It represents the anticipated amount of accounts receivable that will never be collected.

Expanded Definition
Also known as bad debt reserve, allowance for doubtful accounts helps small business owners be realistic about their cash flow. When you extend credit to a customer, there is a chance that they will not pay you. For example, the customer may go out of business or refuse to pay based on a dispute. Doubtful accounts have not been written off yet, but there is reason to believe that payment may not come.

Related Blog Article
What Is Allowance for Doubtful Accounts?
Offer Credit to Customers: Pros and Cons

Get Started
Try it free

Sign up today for a free, no-obligation 30-day trial.

Try It Free for 30 Days
Get Started
Take a demo

Kick the tires with a free self-guided demo.

Take a Self-Guided Demo