Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 7 - Cash and Receivables - Concepts for Analysis - Page 419: Ca7-1a

Answer

By reporting the trade accounts receivable on more than their net realizable value in the balance sheet, the direct write-off method overstates them therefore causing erroneous representation.

Work Step by Step

Moreover, the direct write-off method does not match bad debts expense with the revenues generated by sales in the same period mainly because the write-off often occurs in a period after the revenues were generated.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.