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Is there an accounting concept or principle being violated if a company uses direct write-off method for taxes


The entire situation is this:
A small business in which credit sales fluctuate greatly from year to year uses the direct write-off method for income tax purposes and in its financial statements.
What accounting concept or principle is this, if any. Does this violate and practices in accord with the generally acceptd accounting principles.

Under GAAP, income can only be recognized when all of the following conditions exist: revenue has been earned, it is measurable, and collectibility is reasonably assured. Assuming any one of these items does not exist, the direct write off method is appropriate under GAAP.

If all of these conditions exists and a company still uses the direct write off method for tax purposes, it may "restate" its books on a GAAP basis by recording adjusting entries as appropriate. Tax treatment of these items is typically disclosed in the financial statement footnotes. Source(s): I am a CPA
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