A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and that is usually the most reliable is the
A) Direct write-off method
B) Income statement method
C) Aging of accounts receivable method
D) Simplified balance sheet method
E) Accounts receivable method

Question

Quizplus · Accepted Answer

The aging of accounts receivable method involves analyzing the accounts receivable ledger to determine the age of each account and estimating the likelihood of each account becoming uncollectible based on its age. This method is considered the most reliable because it takes into account the specific characteristics of each account, such as the amount of time it has been outstanding and the creditworthiness of the debtor. The other methods listed do not involve a detailed examination of outstanding accounts and are generally considered less reliable for estimating bad debts expense.

A Method of Estimating Bad Debts Expense That Involves a Detailed