Is direct write off method consistent with generally accepted accounting principles?
Answer
No
If you want to change selection, open original toplevel document below and click on "Move attachment"
Parent (intermediate) annotation
Open it ell on credit to that customer.) One possible approach to recognizing credit losses on customer receivables would be for the company to wait until such time as a customer defaulted and only then recognize the loss ( direct write-off method ). <span>Such an approach would usually not be consistent with generally accepted accounting principles.
Under the matching principle, at the time revenue is recognized on a sale, a company is required to record an estimate of how much of the revenue will ultimately be uncolle
Original toplevel document
4.2. Issues in Expense Recognition 4.2.1. Doubtful Accounts
When a company sells its products or services on credit, it is likely that some customers will ultimately default on their obligations (i.e., fail to pay). At the time of the sale, it is not known which customer will default. (If it were known that a particular customer would ultimately default, presumably a company would not sell on credit to that customer.) One possible approach to recognizing credit losses on customer receivables would be for the company to wait until such time as a customer defaulted and only then recognize the loss ( direct write-off method ). Such an approach would usually not be consistent with generally accepted accounting principles.
Under the matching principle, at the time revenue is recognized on a sale, a company is required to record an estimate of how much of the revenue will ultimately be uncollectible. Companies make such estimates based on previous experience with uncollectible accounts. Such estimates may be expressed as a proportion of the overall amount of sales, the overall amount of receivables, or the amount of receivables overdue by a specific amount of time. The company records its estimate of uncollectible amounts as an expense on the income statement, not as a direct reduction of revenues.
4.2.2. Warranties
At times, companies offer warranties on the products they sell. If the product proves deficient in some respect that is covered
Summary
status
not learned
measured difficulty
37% [default]
last interval [days]
repetition number in this series
0
memorised on
scheduled repetition
scheduled repetition interval
last repetition or drill
Details
No repetitions
Discussion
Do you want to join discussion? Click here to log in or create user.