When evaluating the collectability of accounts receivable:

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The allowance method is used to evaluate the collectability of accounts receivable, which involves estimating uncollectible accounts based on the company's collection experience. The uncollectible-account expense is also recorded using the allowance method as an operating expense in the selling, general, and administrative category. The direct write-off method does not use the allowance for uncollectible accounts to record bad debts, but instead directly writes off the uncollectible accounts as an expense when it becomes evident that those accounts are uncollectible.

When Evaluating the Collectability of Accounts Receivable