Net accounts receivable is:
A)gross accounts receivable minus cost of goods sold.
B)gross accounts receivable minus bad debt expense.
C)gross accounts receivable minus allowance for doubtful accounts.
D)gross accounts receivable minus current liabilities.

Question

Quizplus · Accepted Answer

Net accounts receivable is calculated by subtracting the allowance for doubtful accounts from the gross accounts receivable amount. This is because the allowance represents an estimate of potential uncollectible accounts, so it is important to subtract it from the total amount owed by customers to arrive at a more accurate representation of the company's true receivables position. Choices A, B, and D are not accurate definitions of net accounts receivable.

Net Accounts Receivable Is