Describe the allowance method of accounting for uncollectible receivables. Key Points Under the allowance method, an adjusting entry is made for uncollectible accounts. when an account is determined to be uncollectible, it is written off against the allowance account. The allowance account is a contra asset account that normally has a credit balance after the adjusting entry has been posted. The estimate of uncollectibles may be based on a percent of sales or an analysis of receivables Compare the direct write-off and allowance methods of accounting for uncollectible accounts