True, the direct write-off method is used for tax purposes but is generally not permitted for financial reporting.
Direct write-off method occur when account receivable uncollectible are written or recorded as bad debt and this occur when the money a company is expecting to receive from their customers or clients are uncollectible because the customer did not pay.
Direct write-off method is used for tax purposes because bad debt expense is recorded based on uncollectible amount which is the amount a company is not expecting to receive from their debtors.
This method is not in accordance with the Generally accepted accounting principles which is why it is generally not permitted for financial reporting.
Inconclusion True, the direct write-off method is used for tax purposes but is generally not permitted for financial reporting.
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