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Balance Sheet MethodAnother 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. |
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