Asked by Shilpa Heald on May 04, 2024

verifed

Verified

Discuss the (a) focus and (b) financial statement emphasis of the percent of sales and the analysis of receivables methods of estimating bad debts.

Percent Of Sales Method

A financial forecasting model that estimates future financial statements based on assumed sales growth and historical financial ratios.

Bad Debts

Unrecoverable amounts owed to a company by debtors that are deemed uncollectable and written off as a loss.

Receivables Methods

Methods used by businesses to manage and account for money owed to them by customers for goods or services delivered on credit.

  • Measure the anticipated expense from doubtful accounts and realize its impact on financial disclosures.
verifed

Verified Answer

JM
Josie Myatt [Student]May 09, 2024
Final Answer :
(a) Bad debt expense is the focus of the percent of sales method. It places more emphasis on matching revenues and expenses and thus emphasizes the income statement.​
(b) The allowance for doubtful accounts is the focus of the analysis of receivables method. It places more emphasis on the net realizable value of receivables and thus emphasizes the balance sheet.