The allowance method of accounting for uncollectible accounts is required if
A) the company makes any credit sales.
B) bad debts are significant in amount.
C) the company is a retailer.
D) the company charges interest on accounts receivable.

Question

Quizplus · Accepted Answer

The allowance method is required when bad debts are significant in amount because it provides a more accurate reflection of the realizable value of accounts receivable on the balance sheet by estimating and matching bad debt expenses to the periods in which the related sales occur.

The Allowance Method of Accounting for Uncollectible Accounts Is Required