There are two methods of writing off uncollectible accounts:

• The allowance method(recognized by GAAP)
• The direct write-off method(not recognized by GAAP)

You own a business that sells to customers on trade credit. For example, you manufacture luxury soaps and you sell these soaps to boutique stores in your hometown area.

• How would you manage thecollection of receivables?
• Even with careful planning, sometimes receivables become uncollectible. Which method would you use to write off an uncollectible account? Explain your reasons.
• What procedures would you put into place to encourage customersto pay their bills on time?