Question

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.

Answer 1

The correct answer is Choice A.

The materiality constraint, as applied to bad debts, permits the use of the direct write-off method when bad debts expenses are relatively small.

Answer 2

The materiality constraint, as applied to bad debts often permits the use of the direct write-off method when bad debts expenses are relatively small.

The materiality constraint is often used in bad debts. it gives the right to use direct write-off method when bad debts expenses are little.

The materiality constraint only allows the use of the direct write-off method when bad debts expenses are little in relation to a company's other financial statement items such as sales and net income.

Conclusively, The materiality constraint is a threshold is often used to know if business transactions are important to the financial results of a business.

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