The direct write-off method is generally not permitted for financial reporting purposes because:

Question

Quizplus · Accepted Answer

The direct write-off method does not properly match expenses with revenues because bad debts are only recognized when they are actually written off as uncollectible, which may occur at a different time period from when the related credit sale was made. This violates the matching principle of accounting. The allowance method is preferred because it estimates future bad debts and recognizes them as expenses in the same period as the credit sale, providing better matching of expenses with revenues.

The Direct Write-Off Method Is Generally Not Permitted for Financial