Why Is the Allowance Method Preferred Over the Direct Write-Off

question 17

Multiple Choice

Why is the allowance method preferred over the direct write-off method of accounting for bad debts?

• A) Determining worthless accounts under direct write-off method is difficult to do.
• B) Improved matching of bad debt expense with revenue.
• C) Allowance method is used for tax purposes.
• D) Estimates are used.

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Definitions:

Erythropoiesis

The process of producing red blood cells, which takes place primarily in the bone marrow and is regulated by the hormone erythropoietin.

Erythropoietin

A hormone produced by the kidneys that promotes the formation of red blood cells in the bone marrow.

Erythropoiesis

The process of producing red blood cells (erythrocytes) in the bone marrow, regulated by the hormone erythropoietin.

Folate

A B-vitamin essential for red blood cell formation, healthy cell growth and function, and the prevention of certain birth defects.