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Post by rakhifizry33 on May 15, 2024 22:07:56 GMT -6
This method is also often referred to as the allowance method. Usually companies estimate bad debts at the end of the accounting period or every time they prepare financial reports either monthly quarterly or annually. Later losses resulting from unpaid receivables are recognized as an allowance for bad debts. The following are three types of methods for estimating bad debts in accounting. Percentage method of sales amount Sierra Leone Email List The percentage of sales amount method is a method that assumes that a portion of sales receivables will become uncollectible receivables. This method can also be called the profit and loss method income statement method . This method is based on the companys historical data on what percentage of the previous periods sales amount was an expense for bad debts. Example Company ABC records total annual sales of IDR . Based on previous experience it turns out that around of total sales turn into bad debt expenses. So based on this data the company estimates the value of bad debt expenses in the current period as follows Estimated Uncollectible Receivables Total Sales x Percentage of Uncollectible.
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