The materiality constraint permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

Question

Quizplus · Accepted Answer

The materiality constraint allows for the use of the direct write-off method when bad debts are insignificant or immaterial in relation to a company's other financial statement items, not when they are very large.

The Materiality Constraint Permits the Use of the Direct Write-Off