The Direct Write-Off Method Is Acceptable for Financial Reporting Purposes

question 80

Multiple Choice

The direct write-off method is acceptable for financial reporting purposes only if the bad debt losses are insignificant.

• A)This is a false statement because the direct write-off method violates the matching principle.
• B)This is a true statement based on the concept of materiality.
• C)This is a false statement because the direct write-off method can only be used for tax reporting.
• D)This is a true statement because companies can choose either the direct write-off or the allowance method for financial reporting, as long as they consistently apply the method.

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Definitions:

Banded Gneiss

A metamorphic rock characterized by alternating light and dark mineral bands, formed under high-temperature and high-pressure conditions.

Anticline

A type of fold in the earth's surface where the strata have been bent upwards, creating an arch-like shape.

Syncline

A syncline is a fold in rock layers that slopes upward on both sides towards a central valley, usually indicating layers that were deposited in a basin.

Monocline

A geological fold in which all layers are inclined in the same direction, forming a step-like structure in the stratigraphy.