When the allowance method is used to account for uncollectible accounts, Bad Debt Expense is debited when:

Question

Quizplus · Accepted Answer

When the allowance method is used, Bad Debt Expense is debited when the management estimates the amount of uncollectibles, also known as the allowance for doubtful accounts. This estimate is typically based on historical data and other factors such as economic conditions, customer creditworthiness, and industry trends. As a result, Bad Debt Expense is recognized in the period in which the management makes the estimate, rather than waiting for a specific account to become past due or uncollectible.

When the Allowance Method Is Used to Account for Uncollectible