Wednesday, July 2, 2008

Direct Write Off Method for Bad Debt

Which of the following is true under the direct write-off method of accounting for bad debts?

A. The current year bad debts expense could be more or less than the expense under the allowance method
B. The relationship between net sales and bad debts expense illustrates the matching principle
C. When specific accounts are written off, the Allowance for Bad Debts account is debited
D. The accounts receivables are stated in the balance sheet at their net realizable value

Correct Answer: A

Accounting Examples about Bad Debt Expense:
Percent of Accounts Receivable Method for Estimating Bad Debts Expense
Percent of Sales Method to Calculate Debt Expense

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