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Explain how to account for accounts receivable, including bad debts.

Accounts receivable arise from sales on credit. Companies with many customers may keep detailed records of accounts receivable in a separate subsidiary ledger.
Because not all customers pay their outstanding bills, an estimate of the accounts receivable less any doubtful accounts must be presented on the balance sheet.
Bad debts are estimated under the allowance method by one of two approaches:
Percentage of net credit sales
Percentage of accounts receivable

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91624326

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