Answer:
The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the percentage of receivables basis.
Explanation:
Percentage of receivables basis is preferred over direct write-off of bad debt expenses and is used in the calculation of bad debts, this is done by multiplying the accounts receivable by percentage of expected noncollectable debts and then subtracting accounts for bad debts are then subtracted from accounts receivable on the balance sheet and the result reported as net accounts receivable. It is used in calculating the bad debt expense in each account reporting period.
