When a company has an immaterial amount of bad debts,it may choose to account for bad debt expense using
A)the direct writeoff method.
B)the percentage receivables method.
C)the percentage of credit sales method.
D)aging of accounts receivable method.

Question

Quizplus · Accepted Answer

The direct writeoff method is the best choice when a company has an immaterial amount of bad debts. This method involves recording bad debt expense only when a specific account is determined to be uncollectible, and it is typically used by small businesses or those with a low volume of accounts receivable. The other methods listed (percentage receivables, percentage of credit sales, aging of accounts receivable) are more appropriate for companies with a larger volume of accounts receivable and/or a more significant bad debt expense.

When a Company Has an Immaterial Amount of Bad Debts,it