Which of the following are the two methods of accounting for uncollectible receivables?
A) The direct write-off method and the liability method
B) The asset method and the sales method
C) The allowance method and the liability method
D) The allowance method and the direct write-off method

Question

Quizplus · Accepted Answer

The two methods of accounting for uncollectible receivables are the allowance method and the direct write-off method. The direct write-off method recognizes the bad debt expense only when a specific receivable is identified as uncollectible and is written off. The allowance method, on the other hand, estimates the amount of uncollectible accounts at the end of the period and records an adjusting entry to recognize the estimated bad debt expense. Then, when a specific receivable is identified as uncollectible, it is written off against the allowance for doubtful accounts. Therefore, option D is the correct answer.

Which of the Following Are the Two Methods of Accounting