🎧 New: AI-Generated Podcasts Turn your study notes into engaging audio conversations. Learn more

How do you calculate net realizable value of accounts receivable?

Understand the Problem

The question is asking for the method to calculate the net realizable value of accounts receivable, which typically involves determining the expected cash inflows from receivables, accounting for any estimated uncollectible amounts.

Answer

Total receivable balance less allowance for doubtful accounts.

To calculate the net realizable value (NRV) of accounts receivable, subtract the allowance for doubtful accounts from the total accounts receivable balance.

Answer for screen readers

To calculate the net realizable value (NRV) of accounts receivable, subtract the allowance for doubtful accounts from the total accounts receivable balance.

More Information

Net realizable value provides a realistic estimate of the value of receivables by accounting for the possibility of uncollectible debts.

Tips

A common mistake is not accurately estimating the allowance for doubtful accounts, which can lead to an incorrect NRV.

Thank you for voting!
Use Quizgecko on...
Browser
Browser