The allowance method overcomes shortcomings of the direct write-off method because it
A)recognizes the loss from uncollectible accounts in the period in which the sale occurs and the firm recognizes revenue.
B)reduces the opportunity to manage earnings each period by deciding when particular customers' accounts become uncollectible.
C)reflects the amount a firm expects to collect in cash from the accounts receivable on the balance sheet.
D)all of the above.
E)none of the above.

Question

Quizplus · Accepted Answer

The allowance method recognizes the loss from uncollectible accounts in the period in which the sale occurs and the firm recognizes revenue, which overcomes the shortcoming of the direct write-off method. It also reduces the opportunity to manage earnings each period by deciding when particular customers' accounts become uncollectible and reflects the amount a firm expects to collect in cash from the accounts receivable on the balance sheet. Therefore, option D - all of the above is the correct choice.

The Allowance Method Overcomes Shortcomings of the Direct Write-Off Method