Accounting Dictionary - Accounting Term

Direct Write Off Method

Direct Write off Method is related to the write off of uncollectible Accounts Receivable and their inclusion into expenses.

This is a common practice that business sells goods or provides services on credit, i.e. customer pays for the purchase later after the sale. In case of sale on credit Asset is created and such asset is called Accounts Receivable, which represents a debt from customer for goods sold or services provided.

It might happen that customers fail to pay their debts and Accounts Receivable become uncollectible. If there is no chance to recover a debt from a customer, Accounts Receivable must be written off. Such write off is called Direct Write Off Method, when debt of certain customer is being included into the expenses decreasing balance of Accounts Receivable.

The following entry is made:
D Expenses
                              C Accounts Receivable

 

 

 

 

 

 

 

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