230a_ch6 - Ch 6: Cash and Receivables Balance Sheet: A = L...

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Ch 6: Cash and Receivables Balance Sheet: A = L + SE Assets Cash and Cash Equivalents Net Accounts Receivables= accounts receivable – allowance for doubtful accounts Income Statement: Rev – Exp = NI Revenue (cash and credit sales) Less Expenses Bad Debt Expense Accounts Receivable- credit sales Valuation - Receivables are valued at net realizable value (the net amount expected to be received in cash). Net Realizable Value of AR = Total Accounts Receivable – Allowance for Doubtful Accounts Allowance method —At the end of each accounting period an estimate is made of expected losses from uncollectible accounts. This estimate is debited to Bad Debt Expense and credited to the Allowance for Doubtful Accounts. This method is justified because a company has experienced a loss the moment customers receive goods or services that they will never pay for. This is true even if the specific identity of such customers will not be known for some time. Adjusting entry for estimated uncollectibles associated with current years sales or with
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230a_ch6 - Ch 6: Cash and Receivables Balance Sheet: A = L...

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