The percentage-of-credit-sales method for estimating uncollectible accounts is commonly referred to as the income statement method,because it always results in a higher amount of net income being reported in the income statement.This method is referred to as the income statement method because the estimate of bad debts is based on an income statement amount-credit sales.

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The percentage-of-credit-sales method is referred to as the income statement method because it focuses on estimating bad debts based on the amount of credit sales, which is an income statement figure. However, it does not always result in a higher amount of net income being reported; the effect on net income depends on the specific percentage applied and the amount of credit sales.

The Percentage-Of-Credit-Sales Method for Estimating Uncollectible Accounts Is Commonly Referred