If the Write-Off Is Occurring Because of an Industrywide Downturn

question 26

True/False

If the write-off is occurring because of an industrywide downturn or market crash, it is useful to compare the percentages of the write-off with those taken by other companies in the industry.

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Definitions:

Uncollectible Receivables

Receivables from sales or loans that are not expected to be collected, often written off as bad debts.

Estimate

An approximation or educated guess used to project future financial outcomes or the potential costs of projects.

Direct Write-off

The direct write-off method is an accounting practice where uncollectible debts are written off as an expense only when they are deemed unrecoverable.

Allowance Method

An accounting technique used to estimate uncollectible accounts receivable and adjust the carrying value of the accounts.