Q15RQ - Horngren'S Financial And Managerial Accounting

Question

When a receivable is written off under the allowance method, how does it affect the net realizable value shown on the balance sheet?

Step-by-Step Solution

Answer

There will be no change in net realizable value.

Step 1: Definition of Balance Sheet

The term balance sheet is defined as the company’s financial statement, which shows the business's assets, liabilities, and owner’s equity.

Step 2: Affect on net realizable value

When an account is written off using the allowance methods, there will be no change in the net realizable value shown on the company's balance sheet.