Allowance- Income Statement Approach and Balance Sheet Approach

Question 1

What are primary objectives of Income Statement Approach and Balance Sheet approach?

Answer 1

• Income Statement Approach (matching revenues w expenses)

- Balance Sheet Approach (proper balance sheet valuation)

Question 2

What are you calculating under Income Statement Approach and Balance Sheet approach respectively?

Answer 2

• Income Statement Approach (an income statement number in bad debt expense)
• Balance Sheet Approach (a balance sheet number in allowance for doubtful accounts)