In order to report accounts receivable, net, companies estimate the amount they do not expect to collect from their credit customers.

Question

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Companies estimate the amount they do not expect to collect from their credit customers to report accounts receivable, net. This estimation is known as the allowance for doubtful accounts, which is subtracted from the total accounts receivable to reflect the net realizable value.

In Order to Report Accounts Receivable, Net, Companies Estimate the Amount