Asked by Vritra Official on Apr 25, 2024
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Companies follow both the expense recognition principle and the materiality constraint when applying the direct write-off method.
Expense Recognition Principle
An accounting principle that matches expenses with the revenues they helped to generate, recognizing expenses in the same period as the revenues.
Direct Write-off Method
An accounting method where uncollectible accounts receivable are directly removed from the accounts when deemed irrecoverable.
Materiality Constraint
An accounting principle that allows the omission or misstatement of figures that are not significant enough to influence the decision-making process of users of financial statements.
- Understand the function and processes behind the allowance method in accounting for uncollectible accounts.
- Differentiate the handling of accounts receivable utilizing the allowance method in comparison to the direct write-off method.
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Learning Objectives
- Understand the function and processes behind the allowance method in accounting for uncollectible accounts.
- Differentiate the handling of accounts receivable utilizing the allowance method in comparison to the direct write-off method.
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