Companies follow both the expense recognition principle and the materiality constraint when applying the direct write-off method.

Question

Quizplus · Accepted Answer

The direct write-off method does not follow the expense recognition principle as it only recognizes expenses when a specific accounts receivable balance is deemed uncollectible. It also does not adhere to the materiality constraint as it does not consider the amount of the uncollectible balance when writing it off. Instead, it simply removes the balance from the accounts and does not reflect it in the financial statements.

Companies Follow Both the Expense Recognition Principle and the Materiality