Both the gross amounts of receivables and the allowance for doubtful accounts should be reported in the financial statements.

Question

Quizplus · Accepted Answer

Both the gross amounts of receivables (accounts receivable) and the allowance for doubtful accounts should be reported on the balance sheet section of the financial statements. The allowance for doubtful accounts is a contra-asset account that is used to reduce the gross amount of receivables to their estimated net realizable value. The allowance for doubtful accounts is necessary to reflect the fact that some customers may not pay their bills, and, therefore, some of the receivables may not be collected. The allowance for doubtful accounts is an estimate that is based on historical experience or industry standards. Both the gross amount of receivables and the allowance for doubtful accounts should also be disclosed in the notes to the financial statements.

Both the Gross Amounts of Receivables and the Allowance for Doubtful