Under the allowance method of recording bad debt expense, a company records bad debts:
A) Only at the time it writes off specific customer accounts known to be uncollectible
B) At the end of each accounting period, on an estimated basis
C) Both at the time it writes off specific customer accounts known to be uncollectible, and at the end of each accounting period
D) Only when the allowance for doubtful accounts is reduced to zero

Question

Quizplus · Accepted Answer

Under the allowance method, bad debt expense is recorded on an estimated basis at the end of each accounting period. This is calculated by multiplying the estimated percentage of total credit sales that will ultimately be uncollectible by the total amount of credit sales for the period. The resulting expense is then recorded and the allowance for doubtful accounts is adjusted accordingly. Specific customer accounts are later written off as uncollectible and also recorded in the allowance account.

Under the Allowance Method of Recording Bad Debt Expense, a Company