The percentage of sales method is an approach used to estimate bad debts based on a fixed percentage of total credit sales for a given period. This method simplifies the accounting process by allowing businesses to determine the amount to be charged to the allowance for doubtful accounts directly from the sales figures, without analyzing individual customer accounts. It connects directly to accounts receivable management and the allowance for doubtful accounts, as it helps in anticipating future losses from uncollectible receivables.
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