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

question 155

True/False

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

---

Definitions:

Selling Price

The amount a customer pays to purchase a product or service.

Value-based Pricing

Pricing strategy where the price is based on the perceived value of a product or service to the customer rather than the cost of production.

Industrial Grinder

A machine tool used in manufacturing for grinding, which is a process of removing material using abrasion.

Preventive Maintenance

Routine maintenance and servicing of equipment to prevent unexpected breakdowns and failures.