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tr ch9-1
Chapter 9 part 1
| Question | Answer |
|---|---|
| acid-test ratio | ratio of the sum of cash plus short-term investments plus net current receivables, to total current liabilities. tells whether the entity could pay all its current liabilities if they came due immediately. also called the quick ratio |
| aging-of-accounts method | a way to estimate bad debts by analyzing individual accounts receivable according to the length of time they have been receivable from the customer. also called balance-sheet approach |
| allowance for doubtful accounts | a contra account, related to accounts receivable, that holds the estimated amount of collection losses. also called allowance for uncollectible accounts |
| allowance for uncollectible accounts | a contra account, related to accounts receivable, that holds the estimated amount of collection losses. also called allowance for doubtful accounts |
| allowance method | method of recording collection losses on the basis of estimates, instead of waiting to see which customers the company will not collect from |
| bad-debt expense | cost to the seller of extending credit. arises from the failure to collect from credit customers. also called uncollectible-account expense, or doubtful-account expense |
| balance-sheet approach | a way to estimate bad debts by analyzing individual accounts receivable according to the length of time they have been receivable from the customer. also called aging-of-accounts method |
| collection period | ratio of average net accounts receivable to one days sales. tells how many days sales it takes to collect the average level of receivables. also called the days sales in receivables |
| creditor | the party to a credit transaction who sells goods or a service and obtains a receivable |
| days sales in receivables | ratio of average net accounts receivable to one days sales. tells how many days sales it takes to collect the average level of receivables. also called the collection period |
| debtor | the party to a credit transaction who makes a purchase and has a payable |
| default on a note | failure of a notes maker to pay a note receivable at maturity. also called dishonor of a note |
| direct write-off method | method of accounting for uncollectible receivables, in which the company waits until the credit department decides that a customers account receivable is uncollectible, & then debits uncollectible-account expense & credits the customers account receivable |
| discounting a note receivable | selling a note receivable before its maturity date |
| dishonor of a note | failure of a notes maker to pay a note receivable at maturity. also called default on a note |
| doubtful-account expense | cost to the seller of extending credit. arises from the failure to collect from credit customers. also called uncollectible-account expense, or bad-debt expense |
| due date | date when final payment of the note is due. also called maturity date |
Created by:
tomrobbins
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