An existing balance in Allowance for Doubtful Accounts is not considered when the estimate of loss is based on

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When the estimate of loss is based on a percent of net credit sales, the existing balance in Allowance for Doubtful Accounts is not considered. This method only considers the credit sales made during the period and estimates a percentage of them that will become uncollectible. The existing balance in the allowance account is used with the aging analyze of accounts receivable and the percent of total accounts receivable outstanding methods. The percent of net income is not a commonly used method for estimating doubtful accounts.

An Existing Balance in Allowance for Doubtful Accounts Is Not