Final answer:
Both the allowance for doubtful accounts and net realizable value are estimated amounts.
Step-by-step explanation:
Both the allowance for doubtful accounts and net realizable value are estimated amounts. This statement is true.
The allowance for doubtful accounts is an estimate of the amount of accounts receivable that may not be collected. It is created by recording an expense on the income statement and a contra asset account on the balance sheet. This allowance is based on historical collection patterns and other relevant factors.
The net realizable value, on the other hand, is an estimate of the amount the company expects to collect from its accounts receivable. It is calculated by subtracting the allowance for doubtful accounts from the total accounts receivable. This value reflects the amount the company believes it will actually receive.