Question

Using the balance sheet approach, bad debt expense is an indirect result of estimating the appropriate balance for the allowance for uncollectible accounts.

a) True
b) False

Answer 1

Bad debt expense is an indirect result of estimating the appropriate balance for the allowance for uncollectible accounts using the balance sheet approach.

Step-by-step explanation:

Using the balance sheet approach, bad debt expense is an indirect result of estimating the appropriate balance for the allowance for uncollectible accounts. This means that the bad debt expense is not directly determined, but rather it is calculated based on the estimated amount of uncollectible accounts. The allowance for uncollectible accounts represents the portion of accounts receivable that the company does not expect to collect and is reported as a contra asset on the balance sheet.

When estimating the appropriate balance for the allowance for uncollectible accounts, the company considers factors such as historical collection patterns, industry trends, and economic conditions. By estimating this balance, the company can determine the amount of bad debt expense that should be recognized in its financial statements.