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

Question

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The direct write-off method does not recognize expenses until the exact amount of bad debt is known, which violates the conservatism concept and the matching principle. Therefore, it is not allowed by GAAP. Instead, the allowance method is required to estimate and recognize bad debt expenses in accordance with these accounting principles.

The Direct Write-Off Method Is Not Allowed by GAAP Because