Answer
Bad debt is a receivable deemed uncollectible—the customer can't or won't pay (insolvency, dispute, disappearance). It's recognized as an expense, reducing profit, and removed from receivables. Businesses estimate expected bad debts in advance (an allowance) and write off specific accounts once recovery efforts are exhausted.
Real-world example After a customer files for bankruptcy, their $12,000 balance is judged uncollectible and written off as bad debt.