In accounting, there are two methods for recording bad debts, the direct write-off and the allowance methods. Under the direct write-off method, expenses are recognized only when the account is deemed to be noncollectable. Writing off an account increases bad debt expense and decreases account receivable.
A disadvantage for this method is that a determination and write-off of bad debt may not occur until a later period other than the period of sale. It also will ...
This solution compares and contrasts the direct write-off method and the allowance method of accounting for bad debts.