For a company with significant uncollectible receivables, the direct write-off method is unsuitable because:

Question

Quizplus · Accepted Answer

The direct write-off method violates the matching principle as it only records bad debt expense when a specific customer's account is identified as uncollectible and written off. This means that expenses are not matched with revenues in the correct accounting period, resulting in inaccurate financial statements.

For a Company with Significant Uncollectible Receivables, the Direct Write-Off