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Accounts Receivable Method

A method of estimating bad debts using balance sheet relations; also know as balance sheet method. At the end of each month, uncollectible AR accounts should be estimated and an adjustment should be made to Allowance for Doubtful Accounts which is a contra-asset account. Allowance for doubtful accounts must be estimated for the year and monthly adjustments made to it with Accounts Receivable writeoffs; this entire system is known as the Accounts Receivable Method.

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