The Direct Write-Off Method Is Not Allowed Under GAAP Because

question 26

Multiple Choice

The direct write-off method is not allowed under GAAP because it violates the:

• A)cost principle.
• B)revenue recognition principle.
• C)sales method.
• D)expense recognition principle ("matching").

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Definitions:

Discount Rate

This rate is applied within discounted cash flow analysis to determine the contemporary monetary worth of future cash movements.

Investment Required

The total amount of capital needed to undertake a project, investment, or start a business.

Net Present Value

A method used in capital budgeting to determine the profitability of an investment or project, by calculating the difference between the present value of cash inflows and outflows over a period of time.

Annual Cash Inflows

The total amount of money received by a business, project, or investment on an annual basis from its operational activities.