The direct write-off method is acceptable for financial reporting purposes only if the bad debt losses are insignificant.
A)This is a false statement because the direct write-off method violates the matching principle.
B)This is a true statement based on the concept of materiality.
C)This is a false statement because the direct write-off method can only be used for tax reporting.
D)This is a true statement because companies can choose either the direct write-off or the allowance method for financial reporting, as long as they consistently apply the method.

Question

Quizplus · Accepted Answer

The direct write-off method is acceptable for financial reporting if bad debt losses are insignificant due to the concept of materiality, which allows for simpler accounting methods when the impact is not material.

The Direct Write-Off Method Is Acceptable for Financial Reporting Purposes