In financial accounting, at what amount are accounts receivable initially recorded on the balance sheet?

• A. At their face (invoice) amount, with no consideration of collectibility.
• B. At their fair value discounted to present value using the effective interest rate.
• C. At the amount expected to be collected plus estimated collection costs.
• D. At their net realizable value (estimated collectible amount after subtracting an allowance for uncollectible accounts).

Answer: (D)

Verified step by step guidance

1. Understand that accounts receivable represent amounts owed to a company by its customers from credit sales.
2. Recognize that the initial recording of accounts receivable is typically at the invoice amount, which is the face value of the receivable.
3. Learn that accounting standards require adjusting this initial amount for estimated uncollectible accounts to reflect the amount the company actually expects to collect.
4. This adjustment is done by subtracting an allowance for doubtful accounts, resulting in the net realizable value (NRV).
5. Therefore, on the balance sheet, accounts receivable are reported at their net realizable value, which is the face amount minus the allowance for uncollectible accounts.