Generally accepted accounting procedures allow companies to choose to use either the "direct write-off" or "allowance" methods of accounting for bad debts, regardless of how material the bad debt expense is.

Question

Quizplus · Accepted Answer

The direct write-off method is generally not accepted under Generally Accepted Accounting Principles (GAAP) for material amounts because it does not match expenses with revenues in the period in which they are incurred. The allowance method is preferred as it better adheres to the matching principle by estimating and matching bad debt expense to the period the revenues were earned.

Generally Accepted Accounting Procedures Allow Companies to Choose to Use