The Direct Write-Off Method

question 30

Multiple Choice

The direct write-off method:

• A)results in better matching of costs with revenues than the allowance method.
• B)is an acceptable method under generally accepted accounting principles (GAAP).
• C)requires that losses from bad debts be recorded in the period in which sales are made.
• D)does not report accounts receivable on the balance sheet at their net realizable value.

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Definitions:

Price Increase

A situation where the selling price of goods or services is raised by a company.

Unit Sales

The volume of product sold, representing a key measure of a company's performance and sales activity.

Variable Expense

Expenses that change in proportion to the amount of goods produced or the volume of sales, like materials or commissions on sales.

Selling Price

The amount of money for which a product or service is sold to customers, setting the revenue baseline for a business.