direct write off method

  

Definition

One of the two accounting techniques for charging-off bad debts (the other is called allowance method). In this method, the actual amount of uncollectible accounts receivable is deducted from the sales revenue in the accounting period in which they are determined to be uncollectible, instead of creating a provision for them in the period in which those sales occurred. Although this method is based on facts instead of on estimates, it goes contrary to the matching concept of accounting and is generally not acceptable for financial reporting purposes. However, it is the only bad debt write-off method allowed in the tax code applicable to most US firms. Also called direct charge-off method.

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