The allowance method of accounting for bad debts matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

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The allowance method uses an estimated percentage of sales to record a contra-asset account (allowance for doubtful accounts), which reduces the amount of accounts receivable on the balance sheet to reflect the estimated loss from uncollectible accounts. This method matches the estimated loss from uncollectible accounts receivable against the sales they helped produce.

The Allowance Method of Accounting for Bad Debts Matches the Estimated