The expense recognition principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.

Expense Recognition Principle

An accounting principle that dictates the timing of reporting an expense, aligning it with the revenue it generates to accurately reflect financial performance.

Direct Write-off Method

An accounting method where uncollectable accounts receivable are directly written off against income at the time they are deemed nonrecoverable.

Uncollectible Accounts

Accounts receivable that are considered unlikely to be collected and therefore written off as an expense to the business.