Question
Asked Jan 8, 2020
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Of what merit is the contention that the allowance method
lacks the objectivity of the direct write-off method? Discuss
in terms of accounting’s measurement function.

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Expert Answer

Step 1

Direct write-off method:

 

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

 

Allowance method:

 

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and re...

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