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When financial statements are prepared

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When financial statements are prepared, an expense must be recognized and the receivable balance reduced to net realizable value. However, in the above adjusting entry, why was the accounts receivable account not directly decreased by $7,000 to the anticipated balance of $93,000? This approach is simpler as well as easier to understand. Why was the $7,000 added to an allowanceaccount? In reporting receivables, why go to the trouble of setting up a separate allowance?

Reference no: EM131253874

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