The direct write-off method:
A)ignores the matching principle.
B)is an acceptable alternative method of recognizing bad debt expense under GAAP.
C)results in higher bad debt expense for most companies.
D)may only be used by companies that do not extend credit to their customers.

Question

Quizplus · Accepted Answer

The direct write-off method ignores the matching principle because bad debt expenses are not recognized until the specific account is deemed uncollectible. This means that expenses are not matched with revenues in the same period, which is a violation of the matching principle. As a result, the direct write-off method is not an acceptable alternative method of recognizing bad debt expense under GAAP.

The Direct Write-Off Method