Under the allowance method for uncollectible accounts, bad debts expense is recorded when an individual customer defaults.

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Under the allowance method, bad debts expense is estimated and recorded based on the total credit sales for the period, not when an individual customer defaults. The purpose of the allowance method is to recognize potential bad debts and adjust the accounts receivable balance accordingly. When a specific customer's account is determined to be uncollectible, it is written off as a bad debt against the allowance account previously established.

Under the Allowance Method for Uncollectible Accounts, Bad Debts Expense