If a company uses the direct write-off method of accounting for bad debts,
A)it is applying the matching principle.
B)it will record bad debts expense only when an account is determined to be uncollectible.
C)it will reduce the Accounts Receivable account at the end of the accounting period for estimated uncollectible accounts.
D)it will report accounts receivable on the balance sheet at their net realizable value.

Question

Quizplus · Accepted Answer

The direct write-off method only records bad debts expense when an account is determined to be uncollectible, rather than estimating an allowance for doubtful accounts. This means that the timing of the expense recognition does not follow the matching principle. Additionally, the Accounts Receivable account is not reduced for estimated uncollectible accounts, and the balance sheet may not reflect the net realizable value of accounts receivable.

If a Company Uses the Direct Write-Off Method of Accounting