1. We need an estimate of bad debts so we can accurately show financial reporting, and it...
Question:
1. We need an estimate of bad debts so we can accurately show financial reporting, and it also allows businesses to see risk management.
2. The financial tool used to align the accounting principles with matching principles. This will find the potential bad debt and provide more of a clear statement.
3. The critical difference between the two methods is the timing of it. The allowance method is a preferred method for financial recording, and it aligns with the matching principle. At the same time, the direct write-off method is used more for taxes and will not give you an accurate representation of your business.
4. The Direct write-off method is not accepted under the GAAP because it is seen as a not fair assessment and not accurate since it is more of an estimate than a precise counting of a company's financial position and performance.
5. There are many different ways a company can manipulate the books, some easy ways and there are some definite complex ways a company can do it. Some ways that come to mind are Inflating and deflating bad debts, manipulating the estimates, or even fraudulent documentation.
Reinstate briefly, what your classmate has discussed?
- Extend your classmate's posting with additional information
- If available, suggest alternatives to your classmate's opinion.