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tr ch9-1

Chapter 9 part 1

QuestionAnswer
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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