The direct write-off method

Question

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The direct write-off method is not compliant with the matching principle as it only recognizes bad debts when they are actually written off as uncollectible. Therefore, it is only acceptable if bad debts are small, insignificant amounts. This method is not the primary method used to recognize Bad Debt Expense in practice. The allowance method is the preferred method as it records estimated uncollectible amounts as an expense at the time of sale to better match revenue and expenses.

The Direct Write-Off Method