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What is the difference between a direct write-off and a bad debt accrual? Which is the...

What is the difference between a direct write-off and a bad debt accrual? Which is the preferred method under GAAP - and, in your opinion, is it the best option for a company?

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Answer #1

Whenever we sales made on the credit basis to the our customer than there is some chances to uncollectable some portion of these credti sales. Whenever we have to doubt about to recived the any amount from the customer than at that time we make the provision of Bad Debts and shows this amount as expenses in account.

But sometimes we are sure that the some amount will be not come from the customer, so in this situation we show the bad debt in this situation we can direct write off .
So when we have dounbt to receive the due from the customer then this is called bad debt accruals but when we sure for uncollectable of the amount than we go for the direct wrte off.

Preferred method under the GAAP is the bad debt accrual , under this method provision for bad debts made and if in the future the amount is collected than adjusted the provision otherwise it will write off

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