Direct write-off method

Direct write-off method is a method of accounting for bad debts that involves expensing accounts at the time they are determined to be uncollectible.

Under the direct write-off method, when a company determines a particular account to be uncollectible, it charges the loss to Bad Debts Expense. Assume, for example, that on December 12 Warden Co. writes off as uncollectible M.E. Doran’s $200 balance.

Under this method, Bad Debts Expense will show only actual losses from uncollectible. The company will report accounts receivable at its gross amount.

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