Question

One of the weaknesses of the direct write-off method is that it a.is too difficult to use for many companies b.is based on estimates c.understates accounts receivable on the balance sheet d.violates the matching principle

Answer 1

Answer:D

Explanation: It violates the matching principle

Answer 2

Answer:

The correct answer is letter "D": violates the matching principle.

Explanation:

The direct write-off method is an approach mainly implemented for tax purposes in front of bad debt (uncollectible accounts) by which no allowance account is used. This method consists of removing the account receivable that was not paid without estimating the bad debt. Then the unpaid amount is directly charged at the expense of the profits of the company.

The direct write-off method delays the recognition of the bad debt even from one accounting period to another which violates the matching accounting principle that states all costs related to revenue are expensed in the same period.