The direct write-off method violates the matching principle.

Question

Quizplus · Accepted Answer

The direct write-off method does not match the timing of revenue recognition with the timing of expense recognition as it only recognizes bad debt expense when an account is determined to be uncollectible, rather than estimating the expense at the time of sale. This violates the matching principle, which requires expenses to be recognized in the same period as the revenue they help generate.

The Direct Write-Off Method Violates the Matching Principle