The method for estimating bad debts under the allowance method that focuses on the balance sheet rather than the income statement is based on
A)a direct write-off.
B)an aging of the receivables.
C)credit sales.
D)net sales.

Question

Quizplus · Accepted Answer

The method referred to in the question is the allowance method, which focuses on estimating bad debts on the balance sheet. Option A (direct write-off) is not a method for estimating bad debts, but rather is used for recording actual bad debts. Option C (credit sales) and option D (net sales) are both important in determining the amount of bad debts, but they are not directly related to the specific method mentioned in the question. The aging of receivables is a common method for estimating bad debts under the allowance method by analyzing the age of unpaid receivables and estimating the percentage of those receivables that are likely to be uncollectible.

The Method for Estimating Bad Debts Under the Allowance Method