Question

The direct write-off method is used when ______.

A. uncollectible accounts are not anticipated or are immaterial.
B. a company expects excessive sales returns.
C. a company elects to use this method as one of several alternatives.
D. bad debts are expected to be material in amount.

Answer 1

Answer:C. A company elects to use this method as one of several alternatives.

Explanation:Direct write-offs is one of the several alternative methods available to Organisations to handle bad debts or amounts that are uncollectible. It involves the charging of the bed debt to expenditures as at when it is obvious that an amount can not be recovered or collected.

Another method that is available to companies who are trying to handle bad debts is the Allowance method where the uncollectible amount is recorded in the balance sheet in the same period as the debt.