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Solution:
When uncollectible account is written off under the allowance method, Allowance for doubtful accounts is debited and accounts receivable is credited, resulting in decrease in gross receivable and decrease in allowance for doubtful accounts with same amount. Therefore net realizable value does not decrease when an uncollectible account is written off. Further we have already account of bad debt losses in income statement under the allowance method before account become uncollectible. When business is sure that a particular amount becomes bad, they just set off the account with available allowance balance, hence no impact on net realizable value.
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)c B(a) What are the advantages of using an accounts receiv- able subsidiary ledger? (b) Describe the relationship be- tween the general ledger control account and the subsid ary ledger. What is the purpose of the account Allowance for (SO 2) C Doubtful Accounts? Although the normal balance of this account is a credit balance, it sometimes has a debit balance. Explain how this can happen 81800 Eng cannot understand why net realizable value does under the allowvance method. Clarify...
7/What is the purpose of the account Allowance for (SO2) Doubtful Accounts? Although the normal balance of this account is a credit balance, it sometimes has a debit alance. Explain how this can happen.
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