The direct write-off method is not allowed under GAAP because it violates the principle expense recognition (matching) principle.
A direct write-off is an accounting method by which uncollectible accounts received are written off as bad debts.
- GAAP stands for General Accepted Accounting Principles.
- It is a collection of conventionally and generally accepted accounting rules and standards for financial reportage.
- The direct write-off method is also referred to as the direct charge-off method.
- Upon receiving an invoice that has been deemed uncollectible, bad debts have to be cleared off.
- The direct write-off method violates the principle expense recognition (matching) principle.
- The matching principle states that expenses need to be matched with the revenue for a given period of association.
Therefore, the direct write-off method is not allowed under GAAP because it violates the principle expense recognition (matching) principle.
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