The Materiality Constraint Permits the Use of the Direct Write-Off

question 2

True/False

The materiality constraint permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

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Definitions:

Order for Relief

Legal authorization granted by a bankruptcy court that allows a debtor protection from creditors under bankruptcy laws.

Voluntary Petition

A document filed by an individual or corporation initiating a bankruptcy case of their own accord.

Automatic Stay

A legal provision in bankruptcy law that temporarily halts lawsuits, foreclosures, garnishments, and all collection activities against the debtor the moment a bankruptcy petition is filed.

Discharged Obligations

Responsibilities, debts, or legal duties that have been fulfilled or otherwise legally terminated.