GAAP requires companies to ________ method to record bad debts expense.
A) use the direct write-off
B) use the allowance
C) select either the direct write-off or allowance
D) use the fair value

Question

Quizplus · Accepted Answer

GAAP requires companies to use the allowance method to record bad debts expense. The allowance method is more accurate and matches expenses with revenues in the same accounting period. The direct write-off method violates the matching principle and is not considered acceptable under GAAP. The fair value method is not relevant for recording bad debts expense.

GAAP Requires Companies to ________ Method to Record Bad Debts