An accounting issue for accounts receivable is measurement of the amount on the balance sheet. With regard to measurement, both U.S.GAAP and IFRS require that sellers report accounts receivable _____.
A)the amount that all customers have agreed to pay
B)at the present value of future cash flows
C)net of the estimated uncollectible amount
D)at the future value of present cash flows
E)plus the estimated uncollectible amount

Question

Quizplus · Accepted Answer

Both U.S. GAAP and IFRS require that accounts receivable be reported at the net amount, which means the gross amount less an estimated allowance for uncollectible accounts. This is because, even though the seller expects to collect the full amount owed, some customers may default or become bankrupt, and the seller needs to estimate the amount of potential losses from these situations. This is also known as the "bad debt expense". Therefore, option C is the correct answer.

An Accounting Issue for Accounts Receivable Is Measurement of the Amount