The direct write-off method for uncollectible accounts is not allowed by GAAP because it ignores the conservatism concept and the matching principle.

Question

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The direct write-off method does not consider the conservatism concept, which requires companies to be cautious about recognizing income and assets, and the matching principle, which requires expenses to be matched with revenues. Therefore, GAAP requires companies to use the allowance method for uncollectible accounts instead.

The Direct Write-Off Method for Uncollectible Accounts Is Not Allowed