The method of accounting for losses from uncollectible accounts that produces a proper valuation of the accounts receivable on the balance sheet is
A) the allowance method based on aging the accounts receivable.
B) the allowance method based on a percentage of net credit sales.
C) the direct charge-off method.
D) either the allowance method or the direct charge-off method.

Question

Quizplus · Accepted Answer

The allowance method based on aging the accounts receivable is the best choice as it considers the age and likelihood of collection of each account and provides a more accurate estimate for potential losses. This method also adheres to the matching principle by recognizing the loss in the same period as the related sale.

The Method of Accounting for Losses from Uncollectible Accounts That