We will compare the percentage of accounts receivable to the sales method for calculating the allowance for doubtful accounts and bad debt expense. Under the allowance method we need to calculate the the estimated accounts receivable to be uncollectible and the bad debt expense for a period. We can use either a balance sheet approach or an incomes statement approach. We can focus on valuing the accounts receivable account or on how much of the current period sales are not collectible. The percentage of accounts receivable method focuses on the balance sheet account of accounts receivable and the percentage of sales method focuses on the income statement.
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