Direct write off method definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Direct write off method can be defined as: Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts. The direct write of method is a more simplified method then the allowance method, allowance method being the method preferred by GAAP. The problem with the direct write off method is that it violates the matching principle, the direct write off method expenses bad debt as it come due. By the time we determine that a receivable is bad and write off the revisable, in accordance with the direct write off method, we will be in a period well after the time when the revenue was earned. This means we are recorded the expense in a different time period then the related income to earn in. The allowance method tries to fix this problem of the direct write of method but this fix comes at a cost because the allowance method requires the use of estimates and is more time consuming to do.
