Balance Sheet Method
Another name for the accounts receivable method.
Accounts Receivable Method
• selling goods or services on credit is important to business.
• however, businesses realize that when sales are made on account, some of these accounts receivable will be uncollectible.
• once an A/R is determined to be uncollectible, it is no longer an asset.
• the loss of an asset is an expense (uncollectible accounts expense).
• accounting principles require that in measuring income, revenue should be matched with the expenses incurred in raising the revenue.
• because the A/R may not become uncollectible until sometime later, the uncollectibles must be estimated and then matched.