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Multiple Choice
When initially recorded, the typical accounts receivable is valued at the:
A
net realizable value after deducting estimated uncollectible accounts
B
amount of cash actually received from customers
C
historical cost of goods sold to customers
D
gross amount expected to be collected before any allowance for uncollectible accounts
Verified step by step guidance
1
Understand the concept of accounts receivable: Accounts receivable represents the amount owed to a company by its customers for goods or services provided on credit.
Learn how accounts receivable is initially recorded: When first recorded, accounts receivable is valued at the gross amount expected to be collected, which is the total amount owed by customers before any deductions for estimated uncollectible accounts.
Clarify the term 'gross amount expected to be collected': This refers to the full amount of the receivable without adjustments for allowances or bad debt expenses.
Differentiate between net realizable value and gross amount: Net realizable value is the amount expected to be collected after deducting estimated uncollectible accounts, while the gross amount is the initial value recorded before any deductions.
Review the accounting principle: The gross amount expected to be collected is recorded initially to comply with the historical cost principle, which states that transactions should be recorded at their original value.