A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance method based on

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The allowance method based on aging the trade receivable accounts focuses on estimating bad debts by analyzing the age of the outstanding receivables on the balance sheet. This method considers that older receivables are less likely to be collected and allocates a certain percentage or amount to the allowance for doubtful accounts based on the aging analysis. The other options, like direct write-off, specific accounts, or credit sales, focus on the income statement, recording bad debts as expenses only when they are determined to be uncollectible.

A Method of Estimating Bad Debts That Focuses on the Balance