Final answer:
The aging method estimates uncollectible receivables based on the time each accounts receivable has been outstanding, applying different percentages of uncollectibility to various age groups.
Step-by-step explanation:
The method of estimating uncollectible receivables by determining the balance of the allowance for bad debts account based on the duration each accounts receivable balance has been outstanding is called the aging method. This method groups receivable balances according to how long they have been outstanding and applies different percentage rates deemed uncollectible to each group. Through this approach, companies can create a more accurate estimation of the allowance for doubtful accounts, reflecting the likelihood that older debts are less likely to be collected.