The direct write-off method of accounting for bad debts
A) uses an allowance account.
B) uses a contra-asset account.
C) does not require estimates of bad debt losses.
D) is the preferred method under generally accepted accounting principles.

Question

Quizplus · Accepted Answer

The direct write-off method does not require estimates of bad debt losses because the bad debt expense is recorded only when a specific customer's account is deemed uncollectible. However, this method is not preferred under generally accepted accounting principles because it violates the matching principle by delaying recognition of expenses until a later period.

The Direct Write-Off Method of Accounting for Bad Debts