Direct Write-Off Method

Direct write-off method has been one of 2 most general accounting tools of bad debts

treatment. In direct write-off method, uncollectible accounts receivable have been straightly

written off against income at time while they have really been decided as the bad debts. While

debt has been decided as uncollectible, the journal entry has been passed in that bad debts

expense account has been debited along with accounts receivable account has been credited

Average collection period

Average collection period formula has been the number of days in the period divisible by

receivables turnover ratio.

Numerator of average collection period formula shown at top of page has been 365 days.

For several scenarios, the yearly review about average collection period has been considered.

But, when receivables turnover has been evaluated for separate time period, then numerator must

reflect this similar time period.