Direct Writeoff Method - Accounts Receivable

The video explains the direct write-off method, an accounting approach for handling uncollectible accounts. Unlike the allowance method, it records losses only when accounts are deemed uncollectible, bypassing estimation. This method doesn't align with GAP principles, particularly the matching principle, unless the amounts are immaterial. The video compares it with the allowance method, highlighting key differences and constraints.

What is the main difference between the allowance method and the direct write off method?

Explain the matching principle and how it relates to the allowance method.

What are the two accounting concepts that companies must consider when using the direct write off method?

Under what circumstances can a company choose to directly write off bad debt?

How does the materiality constraint affect the decision to use the direct write off method?