Which of the following is an accounting procedure that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded, and (2) reports accounts receivable at the estimated amount of cash to be collected?
A) Adjustment method for uncollectible debts.
B) Direct write-off method of accounting for bad debts.
C) Allowance method of accounting for bad debts.
D) Cash basis method of accounting for bad debts.
E) Aging of notes receivable.

Question

Quizplus · Accepted Answer

The allowance method of accounting for bad debts estimates and reports bad debts expense based on the credit sales made during the period, and reports accounts receivable at the estimated amount of cash to be collected by creating an allowance for doubtful accounts. This is in contrast to the direct write-off method which writes off bad debts only when they are identified as uncollectible and the cash basis method which only records bad debts when they are actually paid or received. The aging of notes receivable is a method used to estimate the value of notes receivable that may become uncollectible in the future.

Which of the Following Is an Accounting Procedure That (1)