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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Why does the write-off of uncollectible accounts have no effect on the net realizable accounts receivable on the balance sheet if bad debts are estimated? What is the effect of this write-off on the income statement?

To determine

State the reason for which the write-off uncollectible accounts has no effect on the net realizable accounts receivable on the balance sheet, if bad debts are estimated and explain the effect of this write-off on the income statement.

Explanation

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

  • An individual account’s accounting records are written-off, if bad debts expenses are stated based on an estimate. When receivables are ascertained to be uncollected, allowance for doubtful accounts is debited and accounts receivable is credited...

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