The direct write off method to accounting for the impairment of receivables

Question

Quizplus · Accepted Answer

The direct write off method is generally not considered acceptable because it does not match expenses with revenues in the period they are earned. However, it may be considered acceptable when the impact of not using the allowance method would be immaterial. This is usually the case for small businesses with few receivables. Option A is incorrect because the direct write off method may be acceptable in certain circumstances. Option C is incorrect because private entities are allowed to use the direct write off method if it is immaterial to financial statements. Option D is also incorrect because the direct write off method does not take into account estimated uncollectible amounts, resulting in a potentially different net income from the allowance method.

The Direct Write Off Method to Accounting for the Impairment