Question

Saved The following list describes aspects of either the allowance method or the direct write-offf method to account for bad debts. For each item listed, indicate if the statement best describes either the allowance method or the direct write-off method. List Method 1 May be used when bad debts expense is very small in relation to a company's sales and net income. 2 The write-off of a specific account does affect net income The loss from an uncollectible account receivable is written off if and when the account is determined to be 3. uncollectible. 4 Bad debts expense is recorded in the period in which the related sales occur 5 An adjusting entry is generally required during each period. 6 When an account is written off the debit is to a contra asset account

Answer 1

	List	Method
1	May be used bad debts expense is very small in relation to a company sales and net income	Direct write-off method
2	The write-off of a specific account does affect net income.	Direct write-off method
3	The loss from an uncollectible account receivable is written off if and when the account is determined to be uncollectible.	Allowance method
4	Bad debts expense is recorded in the period in which the related sales occur.	Direct write-off method
5	An adjusting entry is generally required during each period.	Allowance method
6	When an account is written off the debit is to a contra asset account	Allowance method

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