Describe the Differences in How the Direct Write-Off Method and the Allowance

question 194

Essay

Describe the differences in how the direct write-off method and the allowance method are applied in accounting for uncollectible accounts receivables.

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Definitions:

Chart of Accounts

An organized list of all the financial accounts in a company's accounting system.

Cash Account

An account that records all transactions involving cash inflows and outflows, including receipts, disbursements, and balances.

Debited

An accounting entry that increases an asset or expense account, or decreases a liability or equity account.

Cash Receipts

The collection of money, including coins, notes, cheques, and electronic transfers, by a business from transactions involving goods or services.