Under the direct write-off method of recognizing a bad debt expense. Which of the following statements is/are true?
AIt violates the matching principle of accounting
BThe bad debt expense is not matched with the related sales
CRevenue is overstated in the year of sales
DAll of the above
Correct answer
D. All of the above
Explanation
Under the direct write off method of recognizing a bad debt expense, the alternative D. is the correct answer which the combination of the following statements A. The bad debt expense is not matched with the related sales because the expense is written off in the year of occurrence and it is not matching with the related sales. B. Revenue is overstated in the year of Sales as a result not making any provision for possible loss on account of non- recoverable account. C. It violates the matching principle of accounting as the expense of bad debt is not matched for the same period of income. Thus, D. is the correct answer.