Which allowance method approach is considered to be an income statement approach to estimating bad debts?

Question

Quizplus · Accepted Answer

The percentage of net credit sales approach is considered to be an income statement approach to estimating bad debts. This is because it focuses on estimating the amount of bad debts as a percentage of net credit sales, which is a measure of the revenue generated on credit sales for a specific period. This method does not consider the accounts receivable balance or the accounts written off, making it an income statement approach. The other options (A, B, and D) are not income statement approaches as they either focus on the accounts receivable balance or the accounts written off.

Which Allowance Method Approach Is Considered to Be an Income