I.	Basis for valuation--Net realizable value (amounts that are realistically anticipated to be collected)
II.	Accounting for Bad Debts
	A.	Direct write-off method--generally not acceptable
		Bad Debts expense recognized when specific accounts are written off as uncollectible
		Results in mismatching revenues and expenses.
	B.	Allowance method
		1.	Percentage of sales: uncollectible experience rate developed based on past history (or industry average). Relate actual write-offs to actual sales over some number of past periods. Results in an average rate. This rate is then applied to current year's sales. The result is an estimate of the current year's Bad Debt Expense. The adjusting entry is made without regard for the balance in the Allowance for Bad Debts account before the adjustment. Emphasis under this approach is on the income statement.
		2.	Analysis of Accounts Receivable:
			i.	percent of year-end aggregate receivables
			ii.	aging of accounts receivable
				appropriate percentage developed and applied to the balances in the appropriate categories or age groupings of receivables. The results are summed. The aggregate amount represents the amount of total receivables that are expected not to be collected. (i.e., the desired balance in the Allowance for Bad Debts). The adjusting entry is made for the amount necessary to adjust the Allowance for Bad Debts account to this balance. In other words, any balance before adjustment must be taken into consideration. This approach is Balance Sheet oriented; the amount of Bad Debt Expense is a "by-product" of this procedure. The focus is on the balance necessary in the Allowance for Bad Debts account.
III.	Receivables should be classified as to source. Officer, employee and affiliate company receivables should be separately disclosed
IV.	Other theoretical considerations
	A.	What is the most desirable amount of Bad Debt Expense?
	B.	What kind of account is Bad Debt Expense?
	C.	Should an allowance be made for estimated discounts and returns and allowances, similar to the allowance for Bad Debts?