Return to the example of accounting for uncollectibles that begins under the heading "Writing off Uncollectible Accounts". Suppose past experience indicates that the company will fail to collect 2 percent of net credit sales, which totalled $100,000 during the three-month period January through March of 2014.
Record bad-debt expense for the three-month period January through March under:
a. The percent-of-sales method (allowance method).
b. The direct write-off method (You need not identify individual customer accounts. Use the data given for Auger and Kirsh on page 531.)
Which method of accounting for uncollectibles is better? What makes this preferred method better? Mention accounting concepts and principles in your answer.