Final answer:
The net amount expected to be received in cash from receivables is the net cash realizable value, which takes potential customer defaults into account by subtracting an allowance for doubtful accounts from the total receivables.
Step-by-step explanation:
The net amount expected to be received in cash from receivables is called the net cash realizable value. This term represents the money that a company expects to collect from its customers after taking into account any potential losses due to customers not paying their debts (defaults or bad debts). Companies often calculate an allowance for doubtful accounts to estimate such loss and subtract it from the total amount of receivables, thereby arriving at the net cash realizable value.
When preparing financial statements, this valuation is important as it reflects a more accurate estimate of the actual resources that will be available to the business. The allowance for doubtful accounts is a crucial component in determining the net cash realizable value, allowing businesses to anticipate and reflect the potential financial impact of credit risk on their cash flows and earnings.