Bad Debt and the Allowance for Doubtful Accounts
Written by Nirmala Murugesan
Curated by Rubric Financial
Last updated
1 / 5
Why Bad Debt Exists
- Some customers who owe you money will never pay, whether from churn, disputes, or insolvency.
- Recognizing revenue on an invoice does not guarantee the cash will ever arrive.
- Bad debt is the portion of your receivables you realistically expect to lose.
- Ignoring it overstates both your assets and your reported financial health.
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About the author
Nirmala MurugesanCA, CPAPartner, Accounting
CA and CPA with 20+ years across U.S. GAAP, IFRS, and cross-border entity accounting. Leads accounting and controllership at StartupCFO: clean close, audit-ready books, and multi-entity structures for venture-backed startups.
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