What is classified as bad debt?

Bad debt refers to amounts owed to a business that are not expected to be collected. This is typically associated with accounts receivable that are deemed uncollectible due to various reasons, such as the debtor's financial instability or bankruptcy.

In this context, uncollectible accounts receivable fit the definition of bad debt, as these amounts cannot be recovered and ultimately impact the financial health of a business. Recognizing and accounting for bad debt is crucial for accurately assessing a company's earnings and managing cash flow.

The other options do not represent bad debt. Fully paid debts indicate a settled transaction, thus they can't be classified as uncollectible. Loans that are given but not returned might suggest potential bad debt, but without specific context regarding their collectibility or the borrower's ability to repay, they do not fit the traditional definition. Finally, debts under dispute may still be collectable depending on the resolution of the dispute, and therefore do not meet the criteria for bad debt either.