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Prin. Acct. Ch. 9
Terms and Definitions
| Question | Answer |
|---|---|
| Accounts Receivable | Amounts owed by customers on account. |
| Accounts Receivable Turnover Ratio | A measure of the liquidity of accounts receivable; computed by dividing net credit sales by average net accounts receivable. |
| Aging the Accounts Receivable | The analysis of customer balances by the length of time they have been unpaid. |
| Allowance Method | A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period. |
| Average Collection Period | The average amount of time that a receivable is outstanding; calculated by dividing 365 days by accounts receivable turnover ratio. |
| Bad Debts Expense | An expense account to record uncollectible receivables. |
| Cash (net) Realizable Value | The net amount a company expects to receive in cash. |
| Direct Write-Off Method | A method of accounting for bad debts that involves expensing accounts at the time they are determined to be uncollectible. |
| Dishonored Note | A note that is not paid in full at maturity. |
| Factor | A finance company or bank that buys receivables from businesses and then collects the payments directly from the customers. |
| Maker | The party in a promissory note is making the promise to pay. |
| Notes Receivable | Claims for which formal instruments of credit are issued as proof of the debt. |
| Other Receivables | Various forms of non-trade receivables, such as interest receivables and income tax refundable. |
| Payee | The party to whom the payment of a promissory note is to be made. |
| Percentage-of-Receivable Basis | Management estimates what percentage of receivables will result in losses from uncollectible accounts. |
| Promissory Note | A written promise to pay a specified amount of money on demand or at a definite time. |
| Receivables | Amounts due from individuals and other companies. |
| Trade Receivables | Notes and accounts receivable that result from sales transactions. |
Created by:
Twilights Dark Angel
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