Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Net Accounts Receivable: Direct Write-off Method

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Direct Write-off Method

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Multiple Choice

When the direct write-off method is used, an entry for bad debt expense is required:

whenever a sale is made on account

at the end of each accounting period based on an estimate

only when a specific account is determined to be uncollectible

when the allowance for doubtful accounts is adjusted

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Verified step by step guidance

Understand the direct write-off method: This method records bad debt expense only when a specific account is determined to be uncollectible, rather than estimating bad debts at the end of each accounting period.

Recognize the timing of the entry: Unlike the allowance method, the direct write-off method does not involve adjusting an allowance account periodically. Instead, bad debt expense is recorded directly when it becomes clear that a specific receivable cannot be collected.

Identify the journal entry: When a specific account is deemed uncollectible, the journal entry involves debiting 'Bad Debt Expense' and crediting 'Accounts Receivable' for the amount of the uncollectible account.

Consider the implications: The direct write-off method does not comply with the matching principle, as bad debt expense may be recorded in a different period than the related revenue. This can lead to less accurate financial reporting.

Apply the concept: To solve problems involving the direct write-off method, focus on identifying the specific account that is uncollectible and recording the appropriate journal entry at that time.