If you use the percent of revenue method uncollectible accounts expense is simply a percent of revenue.
This is known as the income statement approach.
This method does not show the receivables at net realizable value on the balance sheet.
If you use the percent of receivables method uncollectible accounts are estimated using an aging schedule and uncollectible accounts expense is the amount necessary to adjust an allowance account so that the receivables are reported at net realizable value on the balance sheet. This is known as the balance sheet approach.
This method does not match revenues with expenses.
Jun 15th, 2014
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