Final answer:
The direct write-off method of accounting for bad debts violates the matching principle by not recording the bad debts expense in the same fiscal period as the related revenue. It does not accurately reflect expenses in the right period, unlike the allowance method, which is in line with the matching principle.
Step-by-step explanation:
The limitation of the direct write-off method is that it does indeed violate the matching principle. The matching principle is a core accounting concept that stipulates expenses should be recorded in the same fiscal period as the revenues they helped to generate. When using the direct write-off method, bad debt expense is recognized only when a specific account is deemed uncollectible, which may not occur in the same period when the related sales revenue was recognized. This can lead to financial statements that do not accurately reflect the company's financial status within the proper accounting period.
On the other hand, the allowance method is more aligned with the matching principle as it estimates bad debt expenses and records them in the same period as the associated revenues, providing a more accurate matching of income and expenses.