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Ch(3) : Accounting for Receivable67Effect on the balance sheet:Abdulla CompanyBalance Sheet (Partial)At Jan,152019(Before Recovery)Current Assets:Cash42,000Account Receivable 100,000(-) Allowance for Doubtful Accounts (50,000-2,700)(47,300)52,700Inventory140,000Supplies7,300Total Current Assets242,000Abdulla CompanyBalance Sheet (Partial)At Jan,31 2019(After Recovery)Current Assets:Cash42,000Account Receivable 100,000(-) Allowance for Doubtful Accounts (50,000)50,000Inventory140,000Supplies7,300Total Current Assets239,300This basis of estimating uncollectibleemphasizes the matching of expenses with revenues. As a result, bad debt expense will show a direct percentage relationship to the sales base on which it is computed. When the company makes the adjusting entry, it disregards the existing balance in allowance for doubtful accounts.The adjusted balance in this account should be a reasonable approximation of the realizable value of the receivables. If actual write-offs differ significantly from the amount estimated, the company should modify the percentage for future years.