Dillon company uses the allowance method to account for bad debts. the entry to write off a bad account should be debited to Allowance for Doubtful Accounts. credit to Accounts Receivable.
The allowance approach entails setting apart a reserve for lousy money owed which is probably predicted within the destiny. The reserve is primarily based mostly on a percent of the sales generated in a reporting length, likely adjusted for the threat related to certain customers.
An allowance approach is a gadget that estimates uncollectable receivables and bad money owed via the usage of reporting money owed receivable at its realizable fee. In other phrases, it is a technique that manage uses to estimate the wide variety of cash credit score customers will clearly pay.
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