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Why do we record accounts receivable on the balance sheet at net realizable value?

Why do we record accounts receivable on the balance sheet at net realizable value?

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Solution: Since, on the financial statement, any assets or liability should not be overstated or understated. As gross figure of accounts receivable possibly includes some uncollectible amount from doubtful accounts receivable for which we make provision called 'Allowance for doubtful accounts receivable'.

Net figure (i.e. Gross accounts rec. - Allowance for doubtful accounts) shows the correct & true value of the accounts receivable which forms part of the company's current assets in the balance sheet.

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