Use the allowance method to account for uncollectible accounts
-The percentage-of-sales method is called the balance sheet method.

Question

Quizplus · Accepted Answer

The percentage-of-sales method is actually called the income statement method, as it focuses on estimating bad debts based on the amount of credit sales made during a period. In contrast, the allowance method is a balance sheet method, as it involves creating a contra asset account to reflect the estimated amount of uncollectible accounts, which is reported on the balance sheet.

Use the Allowance Method to Account for Uncollectible Accounts