An advantage of basing bad debt expense on the historical relationship between bad debts and net credit sales is that

Question

Quizplus · Accepted Answer

Basing bad debt expense on the historical relationship between bad debts and net credit sales adheres to the matching concept, which requires expenses to be recognized in the same period as the revenue they help generate. This method provides a more accurate estimate of bad debt expense and helps prevent over- or underestimation of accounts receivable. However, it does not directly provide information to the credit department, nor does it consider the balance in the allowance account when making the estimate.

An Advantage of Basing Bad Debt Expense on the Historical