Which method records bad debt expense when a specific receivable becomes uncollectible?

The method that records bad debt expense when a specific receivable becomes uncollectible is the Direct Method. This approach recognizes bad debt expense only when it is certain that a specific account will not be collectible. Under this method, when a receivable is identified as uncollectible, it is written off directly against the accounts receivable, and an expense is recognized at that point in time. This method emphasizes actual losses and is straightforward as it does not require any estimation or allowance for bad debts; it reflects the reality of the uncollectible amount when it is known.

The other methods mentioned involve anticipation and estimation of bad debts. For instance, the Allowance-Credit Sales Method and the Allowance-Aging Receivables Method both create reserve accounts to account for expected uncollectibles based on historical trends or aging analysis of receivables. The Accrual Method relates to recognizing revenues and expenses when they are earned or incurred, rather than when cash is exchanged, but it does not specifically address how bad debts are recognized upon non-collection. Thus, these methods differ significantly from the Direct Method, which operates on the principle of recognizing bad debts at the point of definitive knowledge rather than estimation.