Question

The direct write-off method records bad debt expense only when an account becomes uncollectible, which is not always in the same period as the sale. for this reason, the direct write-off method violates the

Answer 1

The direct write-off method violates the matching principle in accounting as it records bad debt expense in a different period from the sale.

Step-by-step explanation:

The direct write-off method is used to record bad debt expense when an account becomes uncollectible, not necessarily in the same period as the sale. This method violates the matching principle in accounting.

The matching principle states that expenses should be recognized in the same period as the revenues they help generate. However, with the direct write-off method, the bad debt expense is only recognized when the account is deemed uncollectible, which could be in a different period from when the sale occurred.

For example, if a company sells goods to a customer in January and the customer fails to pay in February, the bad debt expense would not be recognized until February under the direct write-off method. This violates the matching principle because the bad debt expense should be recognized in the same period as the sale, which is January.

Answer 2

The direct write-off method violates the matching principal, which says that revenues and expenses are recorded in period that they occur (not necessarily when they are collected/written off).