Under the allowance method for uncollectible accounts, bad debts expense is not recorded until a customer defaults.

Question

Quizplus · Accepted Answer

Under the allowance method, bad debts expense is estimated and recorded in the same period as the sale, even though the specific customer may not have defaulted yet. This is done to match expenses with revenues and to properly reflect the estimated amount of uncollectible accounts in the financial statements.

Under the Allowance Method for Uncollectible Accounts, Bad Debts Expense