Question

12) At a recent board of directors meeting of Ascot , Inc., one of the directors expressed concern over the allowance for doubtful accounts appearing on the company's balance sheet. "I don't understand this account," he said. "Why don't we just show accounts receivables at the amount we should receive if we should them to a financial institution and get rid of that allowance account?

what the balance sheet presentation of accounts receivable is supposed to show?

Answer 1

Disclosure of accounts receivables as per accounting standards and international financial reporting standards :-

1. Debtors should be disclosed at the amount of book value

2. If there is any adjustments to the debtors like provision for doubtful debts written off bad debts should be adjusted after disclosing the the primary balance of debtors as follows :-

balance sheet presentation of account receivables is as follows:-

Particulars	amount
Total debtors	××××
Less :- provision for bad and doubtful debtors	(××××)
Less :- bad debts	(××××)
Net Debtors amount to be disclosed in Balance sheet	××××

In the given case the contention of the director is not appropriate according to the accounting standards and reporting standards we cannot disclose the value of debtors at net realizable value it leads to violation of accounting standards.

So we cannot disclose the data value at net realizable value and we should disclose it book value and if there is any adjustments we should make those adjustments through provision for bad debts or allowance to doubtful debtors.

These are all the standards relating to disclosure of debtors.

I hope, all the above mentioned information and explanations are useful and helpful to you.

Thank you.