Question

he direct write-off method of accounting for uncollectible accounts a. emphasizes the matching of expenses with revenues. b. emphasizes balance sheet relationships. c. emphasizes cash realizable value. d. is not generally accepted as a basis for estimating bad debts.

Answer 1

The direct write-off method of accounting for uncollectible accounts

d. is not generally accepted as a basis for estimating bad debts.

Explanation:

• A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account.
• Rather, an account receivable is written-off directly to expense only after the account is determined to be uncollectible.
• One method of recording the bad debts is referred to as the direct write off method which involves removing the specific uncollectible amount from accounts receivable and recording this as a bed debt expense in the income statement of the business.
• The mechanics of the allowance method are that the initial entry is a debit to bad debt expense and a credit to the allowance for doubtful accounts (which increases the reserve).
• The allowance is a contra account, which means that it is paired with and offsets the accounts receivable account