The percentage of sales method, rather than the percentage of receivables method, would be used to estimate uncollectible accounts if an organization seeks to:
A) Use an aging schedule to more closely estimate uncollectible accounts.
B) Eliminate the need for an allowance for doubtful accounts.
C) Emphasize the accuracy of the net realizable value of the receivables on the balance sheet.
D) Use a method that approximates the matching principle.

Question

Quizplus · Accepted Answer

The percentage of sales method aligns with the matching principle by estimating uncollectible accounts based on a percentage of sales, matching bad debt expense to the period in which the related sales occurred.

The Percentage of Sales Method, Rather Than the Percentage of Receivables