Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Net Accounts Receivable: Allowance for Doubtful Accounts

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Allowance for Doubtful Accounts

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Multiple Choice

Under the allowance method of accounting for uncollectible accounts, how is net accounts receivable reported on the balance sheet?

Accounts receivable less allowance for doubtful accounts

Only the gross accounts receivable is reported

Accounts receivable plus allowance for doubtful accounts

Only the allowance for doubtful accounts is reported

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Verified step by step guidance

Understand the concept of net accounts receivable: Net accounts receivable represents the amount of accounts receivable that a company expects to collect after accounting for potential uncollectible accounts.

Learn about the allowance method: Under the allowance method, companies estimate the amount of uncollectible accounts and record it as an allowance for doubtful accounts, which is a contra-asset account.

Identify the formula for net accounts receivable: Net accounts receivable is calculated as \( \text{Accounts Receivable} - \text{Allowance for Doubtful Accounts} \). This formula reflects the expected collectible amount.

Recognize how net accounts receivable is reported: On the balance sheet, net accounts receivable is presented as a single line item, showing the gross accounts receivable reduced by the allowance for doubtful accounts.

Understand why other options are incorrect: The gross accounts receivable alone does not account for uncollectible accounts, adding the allowance would inflate the receivable amount, and reporting only the allowance would omit the receivable balance entirely.