Accounting › Section H · Accounting for receivables › Topic H.2
Uncollectible accounts and the allowance method
Every business that sells on credit will meet customers who never pay. The allowance method estimates those losses in advance, so that receivables are shown at the cash the company really expects and bad debts land in the same period as the sales that caused them.
In this topic
- The cost of selling on credit
- The direct write-off method
- The allowance method
- Percentage of sales: the income statement approach
- Worked example: percentage of sales
- Percentage of receivables and the aging schedule
- Worked example: an aging schedule
- Writing off and recovering an account
- Common mistakes to avoid
- Key takeaways
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