Recently took a financial modeling test as part of an interview process. The test was a three statement financial model in Excel with certain cells left blank which had to be filled in with the proper formulas. One of them was a cell for "Net Receivables" on the balance sheet. My understanding is that Net Receivables = AR - Allowance for doubtful accounts. But the model didn't include any data on doubtful accounts so I had no idea how to determine the Net Receivables. What am I missing? Is there some other way to back into Net Receivables with other information?
Solving for Net Receivables
Answers
Net Receivables = AR - Customer Credits - A/R Allowance
I don't think you missed anything
Tests are what they are. Invented by somebody who tries to find out about both, your technical know how and your level of confidence when applying this know how. If you had any doubts, you might have tried to come up with "some guess work" rather then sticking to the truth. And yes, if a company has not set up Allowances for bad debts as a short term liability, this balance is the net amount for reporting purposes.
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Accounting