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Im Larry Walther, this is principlesofaccounting.com Chapter 7. In this module, we will look at alternative approaches to applying the allowance method for accounting for uncollectable accounts. In the previous video, in the previous module, we compared and contrasted the direct right off method and allowance methods, without really looking at the mechanics of allowance methods. It was pointed out that the allowance methods are required under generally accepted accounting principles, because of their better matching, their better conceptual underpinnings. So, now its time to look closer at these allowance methods. The allowance is an estimate of uncollectibles. And allowance is necessary because if management knew which accounts are likely to prove uncollectible from the outset, sales to those customers would have likely been avoided to begin with. So, we provide an overall, or aggregate, estimate against our entire outstanding receivables to determine the portion we think are uncoll