The percentage of credit sales method, also called the income statement approach, estimates bad debts based on a historical percentage of sales that lead to bad debt losses.

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The statement is true. The percentage of credit sales method estimates bad debts based on a historical percentage of sales that lead to bad debt losses. This approach is based on the income statement and focuses on matching the bad debt expense with the sales revenue that it relates to.

The Percentage of Credit Sales Method, Also Called the Income