The primary advantages and disadvantages of applying the direct write-off over the allowance method, accounting homework help

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Business Finance

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Week 9

Watch A. Mursau's video titled "Accounts Receivable Bad Debt Expense (Direct Write Off Method Vs Allowance Method)":

Based on the information in the video, discuss the primary advantages and disadvantages of applying the direct write-off over the allowance method of writing off accounts. Take a position on whether or not estimating the allowance for doubtful accounts provides the opportunity to distorts gross income.

Provide support for your rationale.

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Running head: ACCOUNTING

1

Direct Write-Off Method Vs Allowance Method
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Instructor
Course
Date

ACCOUNTING

2

There are various situations that may cause a business to undergo bad debt expenses. In
context to the practices of accounting, bad debt expense is a representation of a number of
uncollectible accounts receivable that takes place within a given period. Mainly takes place
where a customer does not fulfill the agreed obligation to pay some outstanding debt. The
common methods that are applied in writing these accounts are the direct right off and the
allowance (Spiceland, 2011). These two methods are different in the mechanisms that they are
applied in accounting but in some way, the share some few characteristics.
However, when the debtor fails to settle the debt, the company may incur bad debts. In
this way, the companies incur losses on sales (Skousen, 1999). Any business that offers
customers products or services on credit will have to write off bad debts from the invoices.
Management of the companies which use the direct write-off method over allowance method for
accountability of receivables that is uncollectible has got a...


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