Under U.S. GAAP, which method of accounting for uncollectible accounts is required for financial reporting purposes?

Under U.S. GAAP, which method of accounting

Multiple choice — select the best answer

ADirect write-off method
BAging-of-receivables method only
CPercentage-of-sales method only
DAllowance method (any systematic approach)

✓ Correct answer: D. Allowance method (any systematic approach) U.S. GAAP requires the allowance method for financial reporting because it matches bad debt expense to the period of the related sale. The direct write-off method is only acceptable for tax purposes. Both the aging and percentage-of-sales approaches are acceptable allowance-method implementations.

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Topic: Assets & Liabilities

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Under U.S. GAAP, which method of accounting for uncollectible accounts is required for financial reporting purposes?

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