Answer:
Because this approach is better at estimating the true net realizable value of accounts receivable.
Explanation:
Percentage-of-receivables approach is different from percentage-of-sales approach in that it uses gross accounts receivable balance to estimate allowance for doubtful accounts. That is why this approach is also called a balance sheet approach. Contrary, the percentage-of-sales approach directly calculates the amount of bad debt expense while the balance of allowance for doubtful accounts becomes a derivative of the previous period balance in this account, bad debt expense recorded during the period, and bad debt write-offs during the period.
