The direct write-off method estimates the amount of bad debts before they occur.

Question

Quizplus · Accepted Answer

The direct write-off method does not estimate bad debts before they occur but rather records them as they are deemed uncollectible. This method is not in accordance with GAAP (Generally Accepted Accounting Principles) and is only appropriate for small businesses or companies with a low volume of bad debts. Instead, the allowance method is used to estimate and account for bad debts before they occur.

The Direct Write-Off Method Estimates the Amount of Bad Debts