Bad debt expense — also referred to as doubtful debt expense or provision for credit losses — is the charge recognised in a company's income statement representing the estimated amount of accounts receivable or loans that are expected to be uncollectable from customers or borrowers during a financial period. Under accrual accounting principles and Ind AS, companies are required to recognise bad debt expense proactively — based on historical collection experience, customer credit risk assessment, and forward-looking economic conditions — rather than waiting for actual write-offs to occur. Bad debt expense directly reduces net income and is accompanied by a corresponding increase in the allowance for doubtful accounts on the balance sheet. For equity analysts and investors on Ventura Securities, monitoring trends in bad debt expense relative to revenue or receivables is an important signal of deteriorating customer credit quality, weakening collection efficiency, or aggressive revenue recognition — particularly in sectors such as construction, infrastructure services, and B2B distribution where large trade credit exposures can materially impact earnings quality.
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