Of the two methods of accounting for uncollectible receivables, the allowance method makes use of an estimate of uncollectible receivables.

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The allowance method involves estimating the amount of receivables that are expected to be uncollectible and creating an allowance for that amount. This is contrasted with the direct write-off method, which writes off bad debts when they are deemed to be uncollectible.

Of the Two Methods of Accounting for Uncollectible Receivables, the Allowance