A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and that is usually the most reliable is the:

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The aging of accounts receivable method involves analyzing accounts receivable by the length of time they have been outstanding and applying a percentage based on historical collection patterns to estimate the amount that will not be collected. This method is considered the most reliable and accurate method for estimating bad debts expense. Choice A (direct write-off method) is not a recommended method under GAAP because it does not match expenses with revenues. Choices B, C, and E are not methods commonly used for estimating bad debts expense.

A Method of Estimating Bad Debts Expense That Involves a Detailed