The allowance method of accounting for bad debts emphasizes the net realizable value of accounts receivable on the balance sheet when
A)the direct write-off method is used.
B)the percentage of net credit sales approach is used to estimate uncollectibles.
C)the percentage of accounts receivable approach is used to estimate uncollectibles.
D)a company omits cash payments during the accounting period.

Question

Quizplus · Accepted Answer

The allowance method estimates the amount of uncollectible accounts receivable and records it in an allowance for doubtful accounts on the balance sheet. This method emphasizes the net realizable value of accounts receivable because it deducts the estimated uncollectible amount from the total accounts receivable to report a more accurate value. The other options (A, B, and D) do not use the allowance method and do not necessarily emphasize the net realizable value of accounts receivable.

The Allowance Method of Accounting for Bad Debts Emphasizes the Net