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IIA Exam IIA-CIA-Part3 Topic 6 Question 97 Discussion

Actual exam question for IIA's IIA-CIA-Part3 exam
Question #: 97
Topic #: 6
[All IIA-CIA-Part3 Questions]

Senior management is trying to decide whether to use the direct write-off or allowance method for recording bad debt on accounts receivables. Which of the following would be the best argument for using the direct write-off method?

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Suggested Answer: D

by Eve at Jan 25, 2025, 03:29 PM

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Carol
2 months ago
The direct write-off method? More like the 'direct write-off my brain cells' method! Seriously, if we're going for the 'out of sight, out of mind' approach, why not just delete the accounts receivable line altogether?
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Lore
2 months ago
D) Stating receivables at net realizable value is important, but doesn't the allowance method do that better? I mean, who wants to play 'guess the bad debt' every time they look at the balance sheet?
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Flo
2 months ago
C) The IIA prefers the direct write-off method? Really? That's news to me. I thought they were all about transparency and accurate financial reporting. This answer choice seems a bit suspect.
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Nina
1 months ago
C) The IIA prefers the direct write-off method? Really? That's news to me. I thought they were all about transparency and accurate financial reporting. This answer choice seems a bit suspect.
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Gregoria
2 months ago
B) It provides a better alignment with revenue.
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Val
2 months ago
A) It is useful when losses are considered insignificant.
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Ahmed
3 months ago
B) Aligning the revenue with the bad debt expense sounds logical, but doesn't the allowance method do that as well? I feel like the direct write-off method is just sweeping the problem under the rug.
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Nancey
2 months ago
C) It is the preferred method according to The IIA.
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Felicidad
2 months ago
B) The direct write-off method does not match revenue with expenses accurately.
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Chanel
2 months ago
A) It is useful when losses are considered insignificant.
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Annita
3 months ago
A) The direct write-off method is useful when losses are considered insignificant. That's a fair point, but I'm not sure that's the best argument here. Doesn't it just delay recognizing the true state of the company's finances?
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Claribel
1 months ago
C) It is the preferred method according to The IIA.
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Maryanne
2 months ago
A) It provides a better alignment with revenue.
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Sena
2 months ago
B) But doesn't it just delay recognizing the true state of the company's finances?
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Mabelle
2 months ago
A) It is useful when losses are considered insignificant.
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Wilson
3 months ago
But doesn't the direct write-off method violate the matching principle by not aligning bad debt expense with the revenue it relates to?
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Aja
4 months ago
I agree with Carolynn. It makes sense to use the direct write-off method if the losses are not significant.
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Carolynn
4 months ago
I think the best argument for using the direct write-off method is that it is useful when losses are considered insignificant.
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