When is it acceptable to use the direct write-off method to account for uncollectible accounts?

Question

Quizplus · Accepted Answer

The direct write-off method is only acceptable when the expected bad debts are not significant, as it violates the matching principle of GAAP. It is not an acceptable method for financial reporting purposes under GAAP, as it does not reflect the true value of accounts receivables. Choice A is incorrect because significant bad debts should be accounted for using an allowance method. Choice B and E are incorrect because the company's actions related to accounts receivables do not impact the acceptability of the direct write-off method.

When Is It Acceptable to Use the Direct Write-Off Method