Which of the following methods of determining bad debt expense does not properly match expense and revenue?
A) Charging bad debts with a percentage of sales under the allowance method.
B) Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method.
C) Charging bad debts with an amount derived from aging accounts receivable under the allowance method.
D) Charging bad debts as accounts are written off as uncollectible.

Question

Quizplus · Accepted Answer

Charging bad debts as accounts are written off as uncollectible does not properly match expense and revenue because it delays recognizing the bad debt expense until the account is deemed uncollectible. This may result in a mismatch between the revenue recognition and the bad debt expense recognition, which can distort the financial statements. The other methods (A, B, and C) estimate and recognize bad debt expense based on the likelihood of future uncollectible accounts, which better match expense and revenue.

Which of the Following Methods of Determining Bad Debt Expense