How do the percent of revenue method and the percent of receivables method to estimate uncollectible accounts expense differ?
What will be an ideal response?
The percent of revenue method estimates uncollectible accounts expense by taking a percentage of revenue. The percentage used to make the estimate is usually based on the company's past collection experiences. However, the percentage may be adjusted, as needed. On the other hand, the percentage of receivables method estimates the amount of uncollectible expense by basing the estimate on a percentage of accounts receivable (rather than a percentage of revenue). This approach focuses on estimating the most accurate balance for the Allowance for Doubtful Accounts that appears on the year-end balance sheet.
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