If a company uses the direct write-off method of accounting for bad debts,
A) It is applying the matching principle.
B) It will record bad debt expense only when an account is determined to be uncollectible.
C) It will reduce the accounts receivable account at the end of the accounting period for estimated uncollectible accounts.
D) It will report accounts receivable in the balance sheet at their net realizable value.

Question

Quizplus · Accepted Answer

Under the direct write-off method, bad debt expense is recorded only when an account is determined to be uncollectible. This method does not reduce the accounts receivable account at the end of the accounting period for estimated uncollectible accounts or report accounts receivable in the balance sheet at their net realizable value. The matching principle requires that expenses be recognized in the same period as the revenues they help to generate, but the direct write-off method does not apply this principle.

If a Company Uses the Direct Write-Off Method of Accounting