0
The percentage-of-receivables method is a way for a company to estimate its Allowance for Uncollectible Accounts and Bad Debt Expense. It is considered a "Balance Sheet Approach," because total Allowance for Uncollectible Accounts is estimated as a percent of total Accounts Receivable. Bad Debt expense then becomes the increase between the previous year's Allowance and the current year's Allowance.
Hettie Walker
Add your answer:
Earn +20 pts
What is the percentage-of-receivables method?
The percentage-of-receivables method is a way for a company to estimate its Allowance for Uncollectible Accounts and Bad Debt Expense. It is considered a "Balance Sheet Approach," because total Allowance for Uncollectible Accounts is estimated as a percent of total Accounts Receivable. Bad Debt expense then becomes the increase between the previous year's Allowance and the current year's Allowance.
Can a company use a hybrid of the percentage of sales and the percentage of receivables methods?
No. It is not practical or correct to use both methods as the same time. According to GAAP, each method is accepted, but management must choose which method to use, independently of the other.
Why would you use the percentage of sales method of calculating doubtful accounts as opposed to the percentage of receivables method?
I am sorry. But no one in the world knows the answer to that question. We have gone to every state and country but no one knows why. Heck, we dont even understand the question! Percentage of sales is based on the company history, or perhaps the industry standard for losses. If business has been steady than it is simple to predict based on past history what the uncollectible accounts will be. If there is no past history to judge by or industry standard, than percentage of account receivables takes a percentage of the actual amounts due at the end of the period. Since Sarbanes-Oxley Act of 2002, it is very important to have a reliable method of judging receivables, often the biggest liquid asset of any accrual based company. (all public companies). You need to know how much receivables will actually be received to properly value the company. I
The amount of bad debt expense can be estimated by?
Percent of sales is only one method. The other is an analysis of the receivables, either as a percent of total receivables, or doing an aging analysis first.
How do you use the Aging method in accounting?
aging of rereceivable method of chapter 8 receivables problum a8-2
Which method of estimating uncollectible receivables focuses on Uncollectible-account expense for the income statement?
The percent of sales method
Under the allowance method is the the cash realizable value of receivables is the same both before and after an account has been written off?
Under the allowance method, the cash realizable value of receivables is the same both before and after an account has been written off. True.
What is a common methods of hiding embezzlement activities using accounts receivables transactions?
Common method of hiding embezzlement activities
Difference between Percentage of Completion method and Completed Contract method?
Difference between Percentage of Completion method and Completed Contract method?
When was The Receivables Exchange created?
The Receivables Exchange was created in 2007.
What is The Receivables Exchange's population?
The population of The Receivables Exchange is 65.
What is the Receivables Turnover Ratio?
The Receivables turnover ratio is used to measure the number of times on an average; the receivables are collected during a particular timeframe. A good receivables turnover ratio implies that the company is able to efficiently collect its receivables.Formula:RTR = Net Credit Sales / Average Net Receivables
