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1. Which Accounts Receivable uncollectible method does not satisfy GAAP and explain, in your own words,...

1. Which Accounts Receivable uncollectible method does not satisfy GAAP and explain, in your own words, why that method is not in compliance with GAAP?



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Answer #1

Direct write off method is the account receivable method which doesnot satisy GAAP.

Direct write off method is one where Bad debt is recognised when we determine the customer will not pay and no provisions are made.Here no estimation or provision are made and hence does not satisfy the Matching principle of GAAP. Matching principle says that revenue and expense should be matched and recognised in same period.Since, in this method revenue is recognised earlier and expense recorded afterwards. This method is not in compliance with matching principle of GAAP.

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