Under the allowance method of accounting for uncollectible accounts receivable, no attempt is made to estimate bad debts expense.

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Under the allowance method, a company estimates and records bad debt expense based on historical data, current economic conditions, and other factors. This estimation is reflected in the allowance for doubtful accounts, which is a contra asset account that reduces the balance of accounts receivable to its net realizable value.

Under the Allowance Method of Accounting for Uncollectible Accounts Receivable