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A Method of Accounting for Uncollectible Receivables in Which the Company

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A method of accounting for uncollectible receivables in which the company estimates bad debts expense instead of waiting to see which customers the company will not collect from is known as the allowance method.


Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary based on income level, type of income, and other factors.

Current Tax Expense

The amount of income taxes a company is expected to pay in the current year, reflecting its taxable earnings.

Pre-Tax Book Income

The income of a company before taxes are applied, calculated according to accounting standards.

Tax Depreciation

A tax deduction that allows a company to recover the cost of property or assets it has purchased by reducing taxable income.

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