Question

Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is increased... A....

Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is increased...

A. when a credit sale is past due.

B. at the end of each accounting period.

C. whenever a pre-determined amount of credit sales have been made.

D. when an account is determined to be uncollectible.

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Answer #1

Under direct write off method the uncollectible accounts are not transfer to allowance for their bad debts account as no allowance account is prepared, instead they are directly debited to bad debt expense as and when the account is determined to be uncollectible.

it is not necessary that bad debt expense will increase at the end of each accounting period as it depends upon the the uncollectible accounts receivable at the end of year. Also the bet express will not increase due to any predetermined amount of credit sales as it is not determined to be uncollectible. And no past due credit sale have effect on bad debts.

Therefore the correct option is D i.e. when an account is determined to be uncollectible.

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