Asked by Emily Talbot on Jul 08, 2024
Verified
The difference between the balance in Accounts Receivable and the balance in Allowance for Doubtful Accounts is called the net realizable value of the receivables.
Net Realizable Value
The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.
Allowance for Doubtful Accounts
A contra-asset account representing estimated uncollectible accounts receivable due to the customer's inability to pay.
Accounts Receivable
Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.
- Recognize the treatment of receivables in financial statements and the impact of bad debt on net income.
Verified Answer
JT
Jacob ThackerJul 13, 2024
Final Answer :
True
Explanation :
That is correct. The net realizable value is calculated by subtracting the balance in the Allowance for Doubtful Accounts from the balance in Accounts Receivable. This gives the amount that is expected to be collected from customers, which is the net realizable value.
Learning Objectives
- Recognize the treatment of receivables in financial statements and the impact of bad debt on net income.