A company using the percentage of sales method for estimating bad debts has sales of $350,000 and estimates that 1.0% of its sales are uncollectible.The unadjusted balance in Allowance for Doubtful Accounts is a $300 credit.The estimated amount of bad debts expense is $3,200

Percentage of Sales Method

A financial forecasting model that assumes certain expenses and incomes will vary directly with sales.

Allowance for Doubtful Accounts

A contra-asset account that estimates the portion of accounts receivable which may not be collectible.

Bad Debts Expense

An expense account reflecting estimated uncollectible accounts receivable.