Percent of Sales Method

Percent of Sales Method as the name implies measures uncollectible AR as a percentage of total sales made by the company. More specifically, these sales should be credit sales. For instance, if a company has $5 million of credit sales and thinks 3% of these will be uncollectible, then the percent of sales method number would be 3% x $5million = $150,000. Hence, this is the amount the company will be writing off from their books.

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