Final answer:
In assessing the adequacy of the allowance for uncollectible accounts, the credit manager's opinion is the least reliable, whereas aging schedules, subsequent collections, and historical ratios are more objective and should be relied upon to estimate the risk of default accurately.
Step-by-step explanation:
In determining the adequacy of the allowance for uncollectible accounts, the least reliance should be placed upon the credit manager's opinion. This subjective assessment can vary based on the individual's experience and perspective, whereas an aging schedule of past due accounts, subsequent year collections on amounts in accounts receivable at the balance sheet date, and ratios indicating the historical relationship of the valuation allowance to net credit sales are more objective and reliable methods. A well-run bank, for instance, will factor in the risk of non-repayment into its planning by estimating a percentage of loans that will be uncollectible, as the bank's expenses each year include a provision for loan losses. This estimated allowance is critical to reflect a realistic value of the bank's loans on its balance sheet.
For illustration, during a recession if a bank like the Safe and Secure Bank experiences a higher than expected rate of loan defaults, then its loans may decline significantly in value, which in turn can result in the bank having negative net worth. Hence, the most reliable methods in determining the allowance for uncollectible accounts are based on actual historical data and not on individual opinions.