The-definition.com

Definition

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.

Share it:  Cite

More from this Section

  • Days in inventory
    A variant of the inventory turnover ratio is days in inventory that measures the average ...
  • Honor of notes receivable
    A note is honored when its maker pays it in full at its maturity date. For an interest ...
  • Tax Rule
    A tax rule, often referred to as the LIFO conformity rule, requires that if companies ...
  • Accrual-basis accounting
    Accrual-basis accounting refers to an accounting basis in which companies record transactions ...
  • Stock dividend
    A stock dividend is a pro rate distribution to stockholders of the corporation’s own ...