Interpreting the Allowance Method for Accounts Receivable At a recent board of directors meeting of Bismark Corp., one of the directors expressed concern over the allowance for uncollectible accounts appearing in the company’s balance sheet. “I don’t understand this account,” he said. “Why don’t we just show accounts receivable at the amount owed to us and get rid of that allowance?” Respond to the director’s question; include in your response

(a) an explanation of why the company has an allowance account,

(b) what the balance sheet presentation of accounts receivable is intended to show, and

(c) how accrual accounting (as opposed to the cash-basis accounting) affects the presentation of accounts receivable.