Multiple Choice
Which of the following statements about the days’ sales uncollected ratio is FALSE?
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7. Receivables and Investments
Net Accounts Receivable: Allowance for Doubtful Accounts
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which term refers to the amount of accounts receivable that a company expects to collect after accounting for estimated uncollectible accounts?
A
Gross Accounts Receivable
B
Allowance for Doubtful Accounts
C
Bad Debt Expense
D
Net Accounts Receivable
Verified step by step guidance1
Understand the concept of accounts receivable: Accounts receivable refers to the money owed to a company by its customers for goods or services provided on credit.
Learn about uncollectible accounts: Not all accounts receivable will be collected, as some customers may default on their payments. Companies estimate the amount of uncollectible accounts to account for this risk.
Define the Allowance for Doubtful Accounts: This is a contra-asset account that represents the estimated amount of accounts receivable that will not be collected.
Calculate Net Accounts Receivable: Net Accounts Receivable is determined by subtracting the Allowance for Doubtful Accounts from the Gross Accounts Receivable. The formula is:
Recognize the importance of Net Accounts Receivable: This term represents the realistic amount a company expects to collect from its accounts receivable, making it a critical figure for financial reporting and decision-making.
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