Allowance Method VS Direct Write Off Method – Financial Accounting

We will compare and contrast the allowance method and the direct write off method for dealing with accounts receivable. Accounts receivable is an asset but it is possible for it to be overstated by the amount of receivable not collectible. We could weight until we determine these receivables to be collectible to writhe them off, the direct write off method, or we can make an estimate of the uncollectable amount, the allowance method. The direct write off method is easier to use, takes less steps and requires less estimates, but it does not comply with the matching principle as well. The allowance method requires and estimate but does a better job of matching the bad debt expense with the same time period revenue is earned. The allowance method is the preferred method under Generally Accepted Accounting Principles GAAP For more accounting information see website:…

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