Under the allowance method of accounting for bad debts,the company estimates the amount of bad debts before those debts actually occur.

Question

Quizplus · Accepted Answer

The allowance method involves estimating and recording an allowance for potential bad debts before they actually occur, based on the company's historical experience or other relevant factors. This allows the company to properly match expenses with revenues in the period they are earned, rather than waiting until the debt is officially declared uncollectible.

Under the Allowance Method of Accounting for Bad Debts,the Company