Bad debt
Okay kiddo, imagine you have a lemonade stand and you make a lot of yummy lemonade. You sell it to your friends and family for some money, and you also give them some time to pay you later. That's called credit.
Now, let's say your friend Timmy came to your lemonade stand and he wanted some lemonade too. You gave him some and let him pay you later. But then, Timmy never came back to pay you. That means you lost some money because Timmy didn't keep his promise to pay you back.
That's what bad debt is. When someone owes you money and doesn't pay you back, it hurts your business because you lose money that you expected to get. It's like not getting your allowance from your parents even though they promised to give it to you.
So, it's always important to be careful when you give someone credit and make sure they can pay you back. That way, you can avoid bad debt and keep your business (or your piggy bank) healthy.
Now, let's say your friend Timmy came to your lemonade stand and he wanted some lemonade too. You gave him some and let him pay you later. But then, Timmy never came back to pay you. That means you lost some money because Timmy didn't keep his promise to pay you back.
That's what bad debt is. When someone owes you money and doesn't pay you back, it hurts your business because you lose money that you expected to get. It's like not getting your allowance from your parents even though they promised to give it to you.
So, it's always important to be careful when you give someone credit and make sure they can pay you back. That way, you can avoid bad debt and keep your business (or your piggy bank) healthy.