Which Statement Regarding the Direct Write-Off Method of Bad Debts

question 6

Multiple Choice

Which statement regarding the direct write-off method of bad debts is not true?

• A) Future bad debts are not required to be estimated.
• B) The method is justified on the basis of simplicity.
• C) Bad debts are matched against the related sales revenue.
• D) Bad debts are written off when they are determined to be uncollectable.

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Definitions:

Debtor

Under Article 9 of the Uniform Commercial Code, any party who owes payment or performance of a secured obligation, whether or not the party actually owns or has rights in the collateral.

Creditor

An individual or institution that lends money or extends credit to another, with the expectation of being repaid.

Stale Check

A check, other than a certified check, that is presented for payment more than six months after its date.

Good Faith

A concept involving an honest intention to act without taking an unfair advantage over another party, typically implied in agreements or transactions.