Companies must follow both the matching principle and the materiality principle when considering the use of the direct write-off method.

Question

Quizplus · Accepted Answer

Companies must follow the matching principle, but they must use the allowance method instead of the direct write-off method for accounting for bad debts. The materiality principle guides companies in determining whether an item is significant enough to be disclosed in financial statements.

Companies Must Follow Both the Matching Principle and the Materiality