If a company uses a percentage of net sales in computing the amount of uncollectible accounts expense:

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Using a percentage of net sales in computing the amount of uncollectible accounts expense emphasizes the relationship between revenue and expenses, rather than the valuation of receivables at the balance sheet date. This method assumes that a certain percentage of sales will result in uncollectible accounts and expenses are recorded accordingly. It does not directly consider the specific circumstances of individual accounts receivable, such as their age or creditworthiness. Valuation allowance may still be required to adjust the remaining balance of accounts receivable to their estimated realizable value. Past-due accounts are typically included in the overall balance of accounts receivable, not listed separately in the balance sheet.

If a Company Uses a Percentage of Net Sales in Computing