Question

The method being used to determine the amount of the allowance for doubtful debts that relies on a schedule in which customers balances are classified by the length of time they have been unpaid, is known as the

Select one:
a. Percentage of net sales method
b. ageing the accounts receivable method
c. net realisable method
d. direct write-off method

Answer 1

The ageing the accounts receivable method is used to estimate the allowance for doubtful debts by classifying customer balances based on how long they have been unpaid, thereby predicting collectability.

Step-by-step explanation:

The method being used to determine the amount of the allowance for doubtful debts that relies on a schedule in which customers' balances are classified by the length of time they have been unpaid is known as the ageing the accounts receivable method. This accounting technique categorizes each outstanding account receivable by how long it has been outstanding, often breaking down the schedule into increments (e.g., 0-30 days, 31-60 days, and so forth). Businesses use this method to estimate the likelihood that receivables will be collected and to establish an appropriate allowance for doubtful debts based on each category's historical collection rate.