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

question 103

Multiple Choice

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

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

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Definitions:

Corporate Strategies

Plans or methods employed by a company to achieve its business goals and secure a competitive position in the market.

Corporate Purpose

The stated, overarching goals and intentions of a corporation, guiding its decisions and operations.

Mission Statement

A formal summary of the aims and values of a company, organization, or individual.

Operating Plans

Comprehensive outlines detailing a company's objectives and the strategies and processes to be implemented to achieve those objectives within a specific timeframe.