Bad Debt Reserve

A bad debt reserve would be the worst player on a pro sports team. Paid too much and he never plays.

Actually, the bad debt reserve is the amount of receivables (invoices, loans, etc) that a company does not expect to ever collect. An account is established by the company to cover or offset losses that arise from future bad debts.

Companies often use a percentage of accounts receivable, or historical trends to establish the size of the bad debt reserve account.