The direct write-off method
A) may be used only by businesses with five or fewer accounts receivable.
B) is used by businesses whose receivables are a small part of their current assets.
C) may not be used by companies that accept MasterCard or VISA.
D) does not allow for reinstatement if the amount owed is received after being written off.

Question

Quizplus · Accepted Answer

The direct write-off method is typically used by businesses whose receivables are a small part of their current assets. It involves writing off the uncollectible amount directly from the Accounts Receivable account, without any prior provision for bad debts. Option A is incorrect because there is no requirement on the number of accounts receivable to use this method. Option C is incorrect because the acceptance of credit cards is not relevant to the use of the direct write-off method. Option D is incorrect because the direct write-off method does not allow for reinstatement once the amount is written off.

The Direct Write-Off Method