Question

Which statement is true about reporting receivables on the balance sheet?

A) Bad Debts Expense is subtracted from Accounts Receivable and is then shown as a deduction from Accounts Receivable on the balance sheet.
B) Bad Debts Expense is is shown as a deduction from Accounts Receivable on the balance sheet.
C) Bad Debts Expense and Allowance for Doubtful Accounts are shown as a deduction from Accounts Receivable on the balance sheet.
D) Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet.

Answer 1

D. Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet.

Step-by-step explanation:

• Balance sheet is a statement of account that shows the number of assets, liabilities, capital and net profit or loss in an organisation.
• Receivables refers to the amount that the seller ios owed by the customers or buyers.
• Therefore, receivables are current assets in a business and are listed on the left side of the balance sheet.
• Allowance for doubtful accounts is listed as a deduction below the accounts receivable as it is a reduction of the total amounts on accounts receivable.