Question

In accounting for uncollectible receivables, the balance in Allowance for Doubtful Accounts will directly impact the amount of the adjustment when applying which method? A. direct write-off methodB. percentage of sales methodC. Analysis of receivables methodD. both (b) and (c)

Answer 1

Answer:

B. percentage of sales method

Explanation:

Under the Allowance  method there are two ways of analysing the credit sales, one is defining a percentage of the total credit sales, basis in the economy situation and the past events about credit sales, the percentage is determined to estimates allowance for doubtful accounts.

The other way, that isn’t named in the option is through the aging method which classifies the account receivables into diferents age group and estimates the  allowance for doubtful accounts considering the age of each group and asigning a percentage for each one.