What is ‘Dangling Debit’
A debit entry with no offsetting credit entry. Dangling debit occurs when a company purchases goodwill or services to create a debit. When adding the journal entry to financial statements a corresponding credit balance is not reported and cannot be written off. Dangling debit can be received when a company is acquired but is not recorded on the balance sheet.
Explaining ‘Dangling Debit’
When a company purchases goodwill, the company will receive a debit entry on its financial statements, but no entry is entered on the credit side and therefore a dangling debit is created. When a company uses dangling debit in their financial statements, it is offset by affecting the equity of the company by being listed as deductions or negative reserves.
Further Reading
- Reactions to regulation of accounting for goodwill – onlinelibrary.wiley.com [PDF]
- Management activities in financial reports: debates and understanding standard-setters' international harmonization effort – www.sciencedirect.com [PDF]
- The application of intangible asset accounting and discretionary policy choices in the UK football industry – www.sciencedirect.com [PDF]
- The impairment of purchased goodwill: effects on market value – papers.ssrn.com [PDF]
- Regulatory arbitrage through financial innovation – www.emerald.com [PDF]
- Determinants and financial consequences of the method of payment in corporate acquisitions – openaccess.city.ac.uk [PDF]
- The case for the need for personal financial literacy education in Botswana secondary schools – journals.sagepub.com [PDF]
