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(a) Methods for establishing and maintaining an allowance for bad debts account are as follows:
(1) Allowance for Bad Debts is increased by a certain percentage of total sales or credit sales.
(2) Allowance for Bad Debts is adjusted to a certain percentage of receivables.
(3) Allowance for Bad Debts is adjusted to an amount determined by aging the accounts.
(b) The percentages to use in estimating uncollectible accounts should be based on the collection experience of each individual company. Analysis of the past records can be made to determine the relationships between write-offs and sales or receivables...
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