Which of the following methods of determining annual bad debt expense violates the expense recognition concept? A. Percentage of average accounts receivableB. Percentage of ending accounts receivableC. Percentage of salesD. Direct write-off

D. Direct write-off

Explanation:

Under the direct write-off method, an account receivable is written-off directly to expense (bad debt expense) only after the account is determined to be uncollectible on a company's income statement and there is no contra asset account such as Allowance for Doubtful Accounts.

In the Balance Sheet, the total balance in Accounts Receivable will be reported as a current asset, and no expense will be reported in the Income Statement. As a result: a) the balance sheet is likely to report an amount that is bigger than the amount that will actually be collected and b) the Bad Debts Expense will be reported on the income statement in the year after the year of the sale.