Business Finance
Accounting - Bad Debts

Question Description

How are bad debts accounted for under the direct write-off method? What are the disadvantages of this method?

Final Answer

Using the direct write-off method, companies record a bad-debt expense only when certain accounts receivable have become actually uncollectible. 

Possible disadvantage : Mismatched Expense 

Any bad-debt expense as a result of the uncollected accounts receivable is associated with the original credit sales. But using the direct write-off method, companies might not record a bad-debt expense until a later period when they deem certain accounts receivable as uncollectible. Consequently, the bad-debt expense is inappropriately recorded against the revenue of sales from a later period, mismatching the bad-debt expense with the revenue of the original credit sales.


Anonymous
The tutor was pretty knowledgeable, efficient and polite. Great service!

Anonymous
Heard about Studypool for a while and finally tried it. Glad I did caus this was really helpful.

Anonymous
Just what I needed… fantastic!

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors