21. Accounts receivable are reported in the statement of financial position at their cash realizable value which is accounts receivable less the allowance for doubtful accounts.
22. The allowance for doubtful accounts is closed at the end of the fiscal year and is accomplished by debiting bad debt expense and crediting allowance for doubtful accounts.
23.IFRS requires the allowance method of accounting for bad debts when bad debts are immaterial in amount.
24. Under the allowance method, companies debit every bad debt write-off to Allowance for Doubtful Accounts rather than to Bad Debts Expense.
25. Under the allowance method, the recovery of bad debts affects both the income statement and the statement of financial position.
26 The percentage of receivables basis of estimating bad debts emphasizes statement of financial position relationships and cash realizable value of accounts receivable.
27. When using the percentage of receivables basis of estimating bad debts, the amount of the bad debt adjusting entry will impact statement of financial position accounts only.
28. When using the percentage of sales basis of estimating bad debts, the company disregards the existing balance in the statement of financial position account Allowance for Doubtful Accounts.
29. When using the percentage of sales basis of estimating bad debts, which emphasizes income statement relationships, the company can totally disregard cash realizable value of accounts receivable
30. Notes receivable are reported on the statement of financial position following accounts receivable because notes receivable give the payee a weaker legal claim to assets than accounts receivable.