The allowance method of accounting for bad debts has the following advantages over the direct write-off method including: (You may
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
![**Bar Graph Explanation:**
The graph displays two bars representing percentages. The y-axis shows percentages from 0% to 50%. The x-axis labels are "Total Sales" and "Bad Debts." Both bars, depicted in yellow, correspond to the respective categories.
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**Knowledge Check 01:**
The allowance method of accounting for bad debts has the following advantages over the direct write-off method, including (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.):
- [ ] Records estimated bad debts expense in the period when the related sales are recorded.
- [ ] Records estimated bad debts expense when the account receivable is determined to be uncollectible.
- [ ] Reports accounts receivable on the balance sheet at the estimated amount of cash to be collected.
- [ ] Reports sales on the income statement at the estimated amount of cash to be collected.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F15cd763b-5763-4f34-ac90-fb3a4d78f352%2Fc8d85262-37e6-4597-a8c8-05742a5ba125%2Fmz8sced_processed.png&w=3840&q=75)
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