Question

True/False - The "income statement approach" and the "direct write-off method" are two ways to refer to the same method for recognizing bad debts expense

Answer 1

False. The income statement approach and the direct write-off method are two different methods for recognizing bad debts expense.

Step-by-step explanation:

The statement is false. The income statement approach and the direct write-off method are two different methods for recognizing bad debts expense.

The income statement approach is a method of accounting for bad debts that uses an estimated percentage of credit sales to determine the bad debts expense. This method recognizes the expense on the income statement in the same period as the related credit sales. It is often used for financial reporting purposes and adheres to the matching principle.

On the other hand, the direct write-off method is a method of accounting for bad debts that recognizes the expense only when a specific customer's account is deemed uncollectible. This method does not adhere to the matching principle and is generally not accepted for financial reporting purposes.