There are two reasons why the direct write-off method is not allowed.
First, applying the matching principle implies that the cost of the uncollectible accounts need to be expensed in the period of the sale. Giving credit to customers helps to generate sales (if this were not the case, the firm would simply demand payment at time of delivery). Thus, not creating an allowance violates the matching principle.
Second, with the direct write-off method, accounts receivable are at the nominal value, whereas the 'true' value (the amount that is expected to be collectible) is most likely lower. Thus, the direct write-off is likely to overstate the value of accounts receivable.
it is acceptable according to GAAP only in the extraordinary circumstances when forecasting the amount of work completed to date is not possible.
GAAP is an acronym for Generally Accepted Accounting Principles
GAAP is an acronym for Generally Accepted Accounting Principles. GAAP is a series of basic rules accepted by those within the accounting community to perform accounting tasks.
Moving average inventory method is not GAAP (generally accepted accounting principles). LIFO (last in, first out) or FIFO (first in, first out) are GAAP. FIFO is the most common method and easy to compute; however LIFO may be used but is much more complicated to compute unless your businesses computer system computes the LIFO computation.
a.k.a. Absorption Costing, is a method that includes direct manufacturing costs as well as indirect manufacturing costs such as machine depreciation and factory. (GAAP Required)
it is acceptable according to GAAP only in the extraordinary circumstances when forecasting the amount of work completed to date is not possible.
Generally Accepted Accounting Principles. There are different types of GAAP in todays world. For example, there is U.S. GAAP (generally accepted acccounting principles in the United States) and U.K. GAAP (generally accepted accounting principles in the United Kingdom).
GAAP is an acronym for Generally Accepted Accounting Principles
GAAP is an acronym for Generally Accepted Accounting Principles. GAAP is a series of basic rules accepted by those within the accounting community to perform accounting tasks.
Moving average inventory method is not GAAP (generally accepted accounting principles). LIFO (last in, first out) or FIFO (first in, first out) are GAAP. FIFO is the most common method and easy to compute; however LIFO may be used but is much more complicated to compute unless your businesses computer system computes the LIFO computation.
GAAP - Generally Accepted Accounting Principles
GAAP stands for Generally Accepted Accounting Principles. Non-GAAP means that the financial statements or financial measures have been prepared on a basis other than those generally accepted.
GAAP stands for Generally Accepted Accounting Principles. Non-GAAP means that the financial statements or financial measures have been prepared on a basis other than those generally accepted.
Accounting
GAAP
a.k.a. Absorption Costing, is a method that includes direct manufacturing costs as well as indirect manufacturing costs such as machine depreciation and factory. (GAAP Required)
Generally Accepted Accounting Principles, or GAAP, are the standards used by accountants. GAAP ensures that all companies report financial information in a consistent manner.