One of the weaknesses of the direct write-off method is that it:
A) understates accounts receivable on the balance sheet.
B) violates the matching principle.
C) adjusts allowance account the end of the year.
D) is based on estimates.

Question

Quizplus · Accepted Answer

The direct write-off method violates the matching principle because it delays the recognition of expenses until the period in which the company decides to write off the bad debt, rather than recognizing the expense in the same period as the related revenue. This can result in an overstatement of net income in one period and an understatement in another.

One of the Weaknesses of the Direct Write-Off Method Is