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

Which of the following best describes the cash net realizable value of accounts receivable on the balance sheet?

Accounts Receivable plus Allowance for Doubtful Accounts

Accounts Receivable minus Allowance for Doubtful Accounts

Accounts Receivable minus Bad Debt Expense

Accounts Receivable plus Bad Debt Expense

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Verified step by step guidance

Understand the concept of net realizable value (NRV): In financial accounting, the net realizable value of accounts receivable represents the amount of cash expected to be collected from customers after accounting for potential uncollectible amounts.

Identify the role of the Allowance for Doubtful Accounts: This is a contra-asset account that reduces the total accounts receivable to reflect the estimated uncollectible amounts. It is used to calculate the NRV.

Recognize the formula for NRV: The cash net realizable value of accounts receivable is calculated as Accounts Receivable minus Allowance for Doubtful Accounts. This adjustment ensures the balance sheet reflects the realistic collectible amount.

Clarify why Bad Debt Expense is not included: Bad Debt Expense is an income statement account that records the estimated uncollectible accounts for a specific period. It does not directly affect the calculation of NRV on the balance sheet.

Apply the correct formula: To determine the cash net realizable value of accounts receivable, subtract the Allowance for Doubtful Accounts from the total Accounts Receivable. This ensures the balance sheet reflects the expected cash inflow from receivables.