The direct write-off method is generally not permitted for financial reporting purposes because:

Question

Quizplus · Accepted Answer

The direct write-off method does not properly match bad debt expenses with the revenues they help to generate. This violates the matching principle of accounting whereby expenses should be recognized in the same period as the revenues they generate. This is also the reason why the allowance method is preferable, as it estimates and matches bad debt expenses with revenues in the same accounting period.

The Direct Write-Off Method Is Generally Not Permitted for Financial