What Objectives Will Be Accomplished By Recording An Estimated Amount Of Uncollectible Accounts Expense

Objectives Of Recording Uncollectiblee Accounts Expense

By recording an estimated amount of Uncollectible Accounts Expense, the business can accomplish following two main objectives:

(i) It can calculate the book value of Net Realizable Value of Accounts Receivable that a business will be expected to receive from customers in future. The accounts receivable is shown on balance sheet on assets side at net realizable value to show true and fair view to users of accounting information i.e., what is the actual amount of money due from customers for goods sold on account / credit? So, now accounts receivable shows that value which the company has legally rights to receive from customers on due date against the sales on account.

(ii) It follows Matching Principle by matching uncollectible accounts expense with sales on account / credit sales for the current accounting period and as a result the true picture of current accounting period relevant to uncollectible account expense and sales on account is shown on Income Statement.

Other Objective:

Basically, the business tries to provide accounting information nearest to accuracy related to uncollectible accounts or sales on account for the period.