Companies sell to their customers in cash or on account. Recall that sales "on account" are those where the customer promises to pay the company at a later date. Sales on account create an accounts receivable asset for the company. Accounts receivable, also called trade receivables, represent the right to receive cash in the future from customers for goods sold or for services performed. Selling on account brings both a benefit and a cost. The benefit to a business is the potential increased revenues and profits by making sales to a wider range of customers. The cost, however, is that some customers do not pay, creating uncollectible receivables. Customers' accounts receivables that are uncollectible must be written off or removed from the books because the company does not expect to receive cash in the future. Instead, the company must record an expense associated with the cost of the uncollectible account. This expense is called bad debts expense. There are two methods of accounting for uncollectible receiv