For estimating bad debt expense, companies can use the sales method or the receivables method. If a company uses the receivables method, what are they required to do under Generally Accepted Accounting Principles (GAAP)?
Record Bad Debt Expense as a percent of sales and increase the Allowance for Uncollectible Accounts by this amount.
Record Bad Debt Expense when account write-offs occur.
Reduce the Accounts Receivable general ledger by expected uncollectible accounts.
Determine the appropriate ending balance in the Allowance for Uncollectible Accounts.