Asked by Corey Hugenberg on May 02, 2024
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The percent of sales method of estimating bad debts focuses more on the realizable value of accounts receivable than on expense recognition.
Percent of Sales Method
A forecasting technique used to estimate various financial metrics, like expenses or inventory levels, as a percentage of sales revenue.
Realizable Value
An estimate of the amount for which an asset can be sold or a liability settled under current market conditions.
Expense Recognition
An accounting principle that dictates the timing of reporting an expense in the financial statements.
- Execute the percentage of sales strategy and the accounts receivable aging method to calculate expected bad debts.
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Learning Objectives
- Execute the percentage of sales strategy and the accounts receivable aging method to calculate expected bad debts.
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