Question

Under the direct write-off method, uncollectible accounts expense is recognized

a. in an adjusting entry at the end of the accounting period.
b. when the allowance account has a zero balance.
c. when an account is determined to be uncollectible.
d. in a closing entry at the end of the accounting period.

Answer 1

The correct answer is letter "C": when an account is determined to be uncollectible.

Step-by-step explanation:

Bad debt as a result of unpaid credit given to customers can be recorded in the company's books using the allowance method or the direct-write off method. The second approach does not require an allowance account because the account receivable causing the bad debt is directly written-off as an expense whenever the firm decides to tag the account receivable as uncollectible.

The time it takes for a firm to determine that depends on the criteria of its accountants but it is usually extended.