Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because
A) most short-term receivables are not interest-bearing.
B) the allowance for uncollectible accounts includes a discount element.
C) the amount of the discount is not material.
D) most receivables can be sold to a bank or factor.

Question

Quizplus · Accepted Answer

The failure to discount short-term receivables in the balance sheet usually does not make the balance sheet misleading because the amount of the discount is not considered material. Even though ideally short-term receivables should be discounted to obtain their present value, in reality, the discount may not be significant enough to materially impact the financial statements. Therefore, it is not necessary to follow this practice.

Assuming That the Ideal Measure of Short-Term Receivables in the Balance