Purchase Solution

Bad Debt Allowance

Not what you're looking for?

Ask Custom Question

You have started a business that has now been going for a couple of years. Due to the increased volume in sales, you have started noticing more bad debt and want to use the allowance method for estimating bad debt. Would you use the percentage of sales method or the percentage of accounts receivable method and why?

Purchase this Solution

Solution Summary

This solution gives instructions on how to handle bad debt allowance. Included are the definitions of Allowance for Bad Debt, the Percent of "Sales" Method, and the Percent of "Accounts Receivable" Method.

Solution Preview

Hi there, I hope that this helps you.

Some definitions:
Allowance for Bad Debt:
When a credit sale is uncollectable, it will be considered a bad debt. It will be accounted by a (credit) reduction in Accounts Receivable and an (debit) increase in Allowance for Bad Debt. This write-off will affect the balance sheet. This will not affect the Income Statement at this time because it was identified earlier through Allowance for Bad Debt.

Percent of "Sales" Method:
Bad debt would be a percentage ...

Purchase this Solution

Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.


This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce