Randall,Inc.uses the allowance method supported by an aging of its accounts receivable to recognize uncollectible accounts expense in its financial statements.What method of recognizing this expense does Randall use in its income tax return?
A)It must use the same method.
B)The direct write-off method.
C)Either the balance sheet or income statement approach is acceptable.
D)None,since uncollectible accounts expense is not deductible for income tax purposes.

Question

Quizplus · Accepted Answer

The direct write-off method is required for tax purposes, meaning that the expense is only recognized when an account is actually written off as uncollectible. This is different from the allowance method used for financial statement reporting, where an estimated expense is recognized based on an aging of accounts receivable. Therefore, Randall must use the direct write-off method for tax purposes.