What is the unique balance sheet disclosure that the Allowance Method requires, as opposed to the direct write-off method of accounting for bad debts? a) There is no balance sheet disclosure required – there is only an expense recognized on the income statement. b) The accounts receivable balance is reported gross instead of net c) An allowance for doubtful accounts is added to the balance sheet, which nets against gross accounts receivable. The net accounts receivable under this method represents the estimated balance that will actually be collected. d) Certain customers do not have to pay their balance under this method.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
What is the unique
- a) There is no balance sheet disclosure required – there is only an expense recognized on the income statement.
- b) The
accounts receivable balance is reported gross instead of net - c) An allowance for doubtful accounts is added to the balance sheet, which nets against gross accounts receivable. The net accounts receivable under this method represents the estimated balance that will actually be collected.
- d) Certain customers do not have to pay their balance under this method.
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