Charleston, Inc. has Accounts Receivable of $300,000 and an Allowance for Doubtful Accounts of $20,000. If it writes-off a customer account balance of $2,000, what is the amount of its net accounts receivable?

Answer: $280,000

Explanation:

Net Accounts receivable as you probably already know is the amount that the company will receive from credit customers when they paid for the purchases goods they have from the company.

It is also Standard Accounting Practice to provide for an Allowance for Doubtful Accounts because of the risk that Credit Sales will not be received. The amount in this account is one that the company expects it will not receive from it's credit Sales.

Calculating the Net Accounts Receivable is therefore as follows,

Net Accounts Receivable = Gross Accounts receivable - Allowance for Doubtful Accounts

Plugging in the figures we will have,

= 300,000 - 20,000

= $280,000

You might be wondering why there is no treatment for the $2,000 written off by the business in the Net Accounts Receivable calculation.

This is simply because the $2,000 is already included in the Allowance for Doubtful Debt amount and so there is no need to include it again.