Percentage of sales basis is the percentage relationship between the amount of credit sales and estimated losses from uncollectible accounts. In a situation where a company has been in a business for a long time, it might be able to use historical relationships between bad debts and net credit sales to estimate bad debts amount. This approach is based on historical or past experience and forecasted credit policies. This approach is also called an “income statement approach” because of its focus on the size and amount of expense. Usually a percentage is applied to either total credit sales or credit sales (net) of the current accounting year.