Uncollectible Accounts Communication Memo
Draft a one-page response to the president, in the form of a memo, to support your recommendations for the company to use the allowance method. In your response, present the positives and negatives of both the allowance and direct write-off methods, and be as persuasive as possible.
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To the President
Pax Manufacturing Company
August 1, 2018
Subject: Why the Allowance method is more appropriate
With regards to your views and reservations on the use of the allowance method as opposed to the direct write-offs method, I wish to draw your attention to the pros that I have gathered in support of the allowance method. I fully acknowledge the fact that the company’s collectibles are fairly constant from time to time with infrequent variations. However, to adjust the accounts receivables books and the balance sheet, this method is highly recommended because of the uncertainty factor attached to bad debts.
(309 words)