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Financial & Managerial Accounting
Found in: Page 342
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Why does the direct write-off method of accounting for bad debts usually fail to match revenues and expenses?

The direct write-off method of accounting is used by firms when the percentage of their total credit sales is more, and there is a risk of non-payment from the debtors.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Meaning of Matching Concept

The famous accounting principle of the Matching concept states that an organization should match all the relevant revenues with the expenses.

Step 2: Reason

Under the direct write-off method of accounting for bad debts, the total revenues and expenses are not matched because, the bad debts are not recorded in the books of accounts until they become uncollectible, which generally occurs after a credit sale.

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