If a partner's investment in a partnership consists of Accounts Receivable of $25,000 and an Allowance for Doubtful Accounts of $7,000, it would not be appropriate for the partnership to record the Allowance for Doubtful Accounts.

Question

Quizplus · Accepted Answer

The partnership should record the Allowance for Doubtful Accounts along with the Accounts Receivable as it represents a reduction in the amount of expected future cash flows from the receivables. Failure to record it would overstate the investment and potentially mislead users of the financial statements.

If a Partner's Investment in a Partnership Consists of Accounts