There are 2 methods of accounting for uncollectible receivables: Direct Write-Off and Allowance methods. Describe and compare these methods. Make sure to include how estimates can be calculated for the Allowance method.

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Business

Corey Frederick

11 September, 05:10

There are 2 methods of accounting for uncollectible receivables: Direct Write-Off and Allowance methods. Describe and compare these methods. Make sure to include how estimates can be calculated for the Allowance method.

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Timber · Answer 1

The direct write off does not report about the bad debt and does not use the allowance where as the allowance method uses the allowance for doubtful accounts because it provides an estimate for the same.

Explanation:

The allowance method speaks to the accumulation and accrual basis of bookkeeping and is the acknowledged technique to record uncollectible records for monetary bookkeeping purposes. The direct write off method is utilized just when we choose a client won't pay.

The allowance method utilizes the stipend for doubtful records to catch amassed assessments of awful obligations. The direct write-off method does not report bad debt estimates; therefore, it does not use the allowance for doubtful accounts when reporting bad debts.