Direct write off vs allowance
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An adjusting entry is generally required at the end of each period to estimate bad debts.
Allowance
Bad debts expense is recorded in the period in which the related sales occur.
Allowance
When an account is written off, debit Allowance for Doubtful Accounts.
Allowance
Bad Debts Expense is recorded when an account is determined to be uncollectible.
Direct write-off
Does not estimate an allowance for doubtful accounts.
Direct write-off
The write-off of a specific customer account directly affects net income in that period.
Direct write-off
