In this case, a write-off affects both the balance sheet and income statement. Likewise, the company does not make journal entry of accounts receivable write-off like those under the allowance method. And as there is no estimate of losses and no allowance account, the company has not recognized expense for any potential bad debt yet. Direct write-off method is usually only be used by the company that has only a small amount of credit sales or an insignificant balance of receivables. Ensuring Compliance with GAAP Companies write off bad debts…
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