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ACCT110 Ch 9

Accounting for Receivables

Accounts receivable Amounts due from customers for credit sales; backed by the customer's general credit standing.
Accounts receivable turnouver Measure of both the quality and liquidity of accounts receivable; indicates how often receivables are received and collected during the period; computed by dividing net sales by average accounts receivable.
Aging of accounts receivable Process of classifying accounts receivable by how long they are past due for purposes of estimating uncollectible accounts.
Allowance for Doubtful Accounts Contrac asset account with a balance approximating uncollectible accounts receivable ; also called Allowance for Uncollectible Accounts.
Allowance method Procedure that estimates and matches bad debts expense with its sales for the period and/or reports accounts receivable at estimated realizable value.
Bad debts Accounts of customer who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts.
Direct write-off method Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts.
Interest Charge for money (or other assets) loaned from one entity to another.
Maker of the note Entity who signs a note and promises to pay it at maturity.
Matching (expense recognition) principle Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses.
Materiality contstraint Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP.
Maturity date of a note Date when a note's principal and interest are due.
Payee of the note Entity to whom a note is made payable.
Principal of a note Amount that the signer of a note agrees to pay back when it matures, not including interest.
Promissory note (or note) Written promise to pay a specified amount either on demand or at a definite future date; is a note receivable for the lender but a note payable for the lendee (borrower).
Realizable value Expected proceeds from converting an asset into cash.
MACRS (Modified Accelerated Cost Recovery System) Allows strght-line deprec'n for some assets-requires accelerated deprec'n for most assets-separates depreciable assets into different classes-defines depreciable life & rates for each-isn't acceptable for financial reporting.
Created by: slk
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