Question

When is bad debts expense recorded when using the direct write-off method?

Short answer

Answer

Under the direct write-off method, bad debt expenses are recorded in respect of receivable when it is expected that it will never get collected.

Step-by-step solution

Definition of Accounts Receivables

Accounts receivables refer to the amount for which sales are made, but payment is still pending from the customer.

Recording the bad debts expenses using the direct write-off method

When the business entity uses the direct write-off method, it will record the bad debts expenses when they expect that the amount due from the customer’s end will never get collected.