The practice of reporting the net realizable value of receivables in the financial statements is commonly called:
A) the cash flow method of accounting for uncollectible accounts.
B) the direct write-off method of accounting for uncollectible accounts.
C) the allowance method of accounting for uncollectible accounts.
D) the cash flow method of accounting for uncollectible accounts and the direct write-off method of accounting for uncollectible accounts are correct.

Question

Quizplus · Accepted Answer

The practice of reporting the net realizable value of receivables in the financial statements is done through the allowance method of accounting for uncollectible accounts. This method involves estimating a percentage of accounts receivable that may not be collected and creating an allowance or reserve for that amount. The net amount, after subtracting the allowance, is reported as the net realizable value of receivables. The other options, A, B, and D, refer to different methods of accounting for uncollectible accounts receivable but are not related to the reporting of net realizable value in the financial statements.

The Practice of Reporting the Net Realizable Value of Receivables