The two methods of accounting for uncollectible receivables are the allowance method and the:
A)cost method.
B)direct write-off method.
C)interest method.
D)equity method.

Question

Quizplus · Accepted Answer

The direct write-off method involves only recording bad debt expense at the time an account is deemed uncollectible and written off. This method is not generally accepted because it does not match expenses and revenues. The allowance method, on the other hand, matches estimated bad debt expense to revenues during the same reporting period by establishing an allowance for doubtful accounts. The interest method and equity method are used for accounting for investments and have no relation to uncollectible receivables. The cost method is used for valuing inventory and also has no relation to uncollectible receivables.

The Two Methods of Accounting for Uncollectible Receivables Are the Allowance