Final answer:
The face value of accounts receivable less an allowance for doubtful accounts equals the net realizable value, which is what a company actually expects to collect from receivables.
Step-by-step explanation:
The face value of accounts receivable less an allowance for doubtful accounts equals the net realizable value of accounts receivable.
This calculation is part of the accounting practice of estimating the portion of accounts receivable that may not be collected.
The allowance for doubtful accounts is a contra-asset account that reduces the total accounts receivable balance to reflect what the business realistically expects to collect.
The net realizable value is therefore the amount of receivables a company expects to actually turn into cash, giving a more accurate financial picture.