The materiality constraint,as applied to bad debts:

A) Permits the use of the direct write-off method when bad debts expenses are relatively small.
B) Requires use of the allowance method for bad debts.
C) Requires use of the direct write-off method.
D) Requires that bad debts not be written off.
E) Requires that expenses be reported in the same period as the sales they helped produce.

Question

Zybrea Knight · Accepted Answer

Final Answer : A, Explanation :  The materiality constraint allows a company to use the direct write-off method when bad debts expenses are relatively small because it is not material enough to require the more complex allowance method. However, if bad debts become material, the company must switch to the allowance method.

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