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Chapter 14

TermDefinition
Uncollectible accounts Accounts receivable that cannot collected
Allowance method Crediting the estimated value of uncollectible accounts to a contra account
Book value The difference between an asset's account balance and its related contra account balance
Book value of Accounts Receivable The difference between the balance of ACCOUNTS RECEIVABLE and its contra account, ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
Net Realizable Value The amount of accounts receivable a business expects to collect
Percent of Sales Method assumes that a percent of credit sales will become uncollectible.
Percent of Accounts Receivable Method uses an analysis of accounts receivable to estimate the amount that will be uncollectible
Aging of Accounts Receivable Analyzing accounts receivable according to when they are due
Writing off an account Canceling the balance of a customer account because the customer does not pay
Direct write-off method Recording uncollectible account expenses only when an amount is actually known to be uncollectible
Promissory Note A written and signed promise to pay a some of money at a specified time
Note Payable A promissory note signed by a business and given to a creditor is entered into the books as a NOTE PAYABLE
Note Receivable A Promissory note that a business accepts from a customer is entered in the business's books as a NOTE RECEIVABLE
Maker of a note The person or business that signs a note, and thus promises to make payment
Payee The person or business to whom the amount of a note is payable
Principal The original amount of a note, some times referred to the face amount
Interest rate The percent of the principle that is due for the use of the funds secured by a note
Maturity date The date on which the principal is due to be repaid
Time of a note The length of time from the signing date to the maturity date, usually expressed as the number of days, may be referred to as TIME OF A NOTE
Maturity value The amount that is due on the maturity date of a note
Interest income The interest earned on money loaned
Dishonored note A note that is not payed when due.
Created by: andrew.v