Accounting chapter 14 Flashcards
Uncollectible accounts receivable Vocab and true & false
Uncollectible accounts
accounts receivable that cannot be collected
some businesses refer to uncollectible accounts as bad debts.
true
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
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
promissory note.
A written and signed promise to pay a sum of money at a specified time
creditor.
A person or business to whom a liability is owed
note payable.
A promissory note signed by a business and given to a creditor is entered in
the businesses books
note receivable.
A promissory note that a business accepts from a customer is entered in the
business’s books
notes.
Notes payable and notes receivable are frequently referred to simply
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, sometimes referred to as the face amount,
interest rate.
The percent of the principal that is due for the use of the funds secured by
a note
maturity date.
The date on which the principal of a note is due to be repaid
time of a note, or term.
The length of time from the signing date to the maturity date,
usually expressed as the number of days,
interest income.
The interest earned on money loaned
dishonored note.
a note that is not paid when due
The expense of an uncollectible account should be recorded in the accounting period that the account becomes uncollectible.
false
The account, Allowance for Uncollectible Accounts, has a normal credit balance.
true
A business usually knows at the end of the fiscal year which customer accounts will become uncollectible.
false
The account, Allowance for Uncollectible Accounts, is reported on the income statement.
false
The book value of accounts receivable must be a reasonable and unbiased estimate of the money the business expects to collect in the future.
true
The percent of sales method of estimating uncollectible accounts expense assumes that a portion of every dollar of sales on account will become uncollectible.
TRUE`
The accounting concept, Conservatism, is applied when the process of making accounting estimates is free from bias.
false
The percent of each age group of an accounts receivable aging that is expected to become uncollectible is determined by the Securities and Exchange Commission.
false
The adjusting entry for uncollectible accounts does not affect the balance of the Accounts Receivable account.
true
A business having a $300.00 credit balance in Allowance for Uncollectible Accounts and estimating its uncollectible accounts to be $4,000.00 would record a $4,300.00 credit to Allowance for Uncollectible Accounts.
false
When an account is written off as uncollectible, the business sends the customer a credit memo.
false
When a customer account is written off under the allowance method, book value of accounts receivable decreases.
false
The direct write-off method of accounting for uncollectible accounts does not comply with GAAP.
true
When a previously written-off account is collected, Accounts Receivable is both debited and credited for the amount collected.
true
A note provides the business with legal evidence of the debt should it be necessary to go to court to collect.
true
Total assets are reduced when a business accepts a note receivable from a customer needing an extension of time to pay an account receivable.
false
Interest rates are stated as a percentage of the principal.
true
Interest income is classified as an Other Revenue account.
true
The method for calculating interest is the same for notes payable and notes receivable.
true
Interest income should not be recorded on a dishonored note receivable.
false
