The direct write-off method is used for tax purposes but is generally not permitted for financial reporting.

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The direct write-off method is allowed for tax purposes but is not considered acceptable for financial reporting because it does not match expenses to the actual time period in which they occurred. Instead, it involves waiting until a debt is deemed uncollectible before writing it off, which can distort a company's financial statements. For financial reporting purposes, companies are required to use the allowance method, which estimates the amount of uncollectible accounts and records the expense at the time of the sale.

The Direct Write-Off Method Is Used for Tax Purposes but Is