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Intermediate Accounting > Chapter 4: Accounts Receivable > Flashcards

Chapter 4: Accounts Receivable Flashcards

1
Q

Assets that represents contractual rights to receive cash or other asset from another entity.

A

Receivables

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2
Q

Supported by oral or informal promises to pay.

A

Accounts Receivable

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3
Q

Arising from loans extended by financial institutions.

A

Loans Receivable

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4
Q

Arising from advances to officers, employees, suppliers, affiliates.

A

Advances

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5
Q

Classified as current assets when they are expencted to be realized in cash within the normal operating cycle of the business or one year.

A

Trade Receivables

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6
Q

Within what time frame must cash be realized for an asset to be considered a trade receivable?

A
  • Within the normal operating cycle
  • One year
  • Whichever is the longer between the two
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7
Q

Supported by written or formal promises to pay in the form of promissory notes.

A

Notes Receivable

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8
Q

Income earned but not yet received.

A

Accrued Income

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9
Q

From reimbursable deposits paid to cover potential damages or losses.

A

Deposits

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10
Q

From insurance companies for casualties sustained, defendants under suit, government agencies for refundable taxes, and other remittances.

A

Claims Receivable

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11
Q

The time between the acquisition of assets for processing and their realization in cash or cash equivalents.

A

Normal Operating Cycle

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12
Q

How many months in the normal operating cycle of a business?

A

12 months

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13
Q

Current assets only when they are expected to be realized in cash within one year. Non-current if more than one year.

A

Non-trade Receivable

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14
Q

What is the journal entry needed to eliminate a credit balance in accounts receivable due to overpayment?

A

Debit - Accounts Receivable
Credit - Advances from customers

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15
Q

It is included in current liabilities as part of non-trade payables.

A

Advances from customers

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16
Q

Account included in current assets as part of non-trade receivables.

A

Advances to suppliers

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17
Q

What is the inital measurement of receivables?

A

Fair value plus transaction costs

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18
Q

Ownership transferred to buyer upon shipment.

A

FOB Shipping Point

19
Q

Ownership is transferred only when the buyer receives the goods.

A

FOB Destination

20
Q

Seller paid the freight in advance before shipment.

A

Freight Prepaid

21
Q

Carrier will collect the shipping cost from the buyer upon delivery.

A

Freight Collect

22
Q

Who will pay the shipping cost if:

FOB Shipping Point + Freight Collect

A

Buyer

23
Q

Who will pay the shipping cost if:

FOB Destination + Freight Prepaid

A

Seller

24
Q

Who will pay the shipping cost if:

FOB Destination + Freight Collect

A

The seller is responsible for the payment, but since the buyer covered the expense, the buyer can simply deduct the shipping cost from the total price of the goods.

25
Q

Who will pay the shipping cost if:

FOB Shipping Point + Freight Prepaid

A

The seller covered the shipping cost at the time of shipment, but the buyer will include that shipping cost in the total price of the goods to reimburse the seller.

26
Q

Given to encourage orders in large quantities or to avoid frequent changes in catalogs, to alter prices for different quantities purchased, or to hide the true invoice price from competitors.

A

Trade Discounts

27
Q

Deducted from the list price when determining the invoice price. It is not recorded by either the seller or buyer.

A

Trade Discounts

28
Q

The standard price set by a seller for a product or service before any discounts, promotions, or negotiations are applied.

A

List Price

29
Q

The total amount the buyer is obligated to pay to the seller.

A

Invoice Price

30
Q

Under this method, accounts receivable and sales are initially recorded at amounts gross of cash discounts. Cash discounts are recorded only when they are taken by the buyer.

A

Gross Method

31
Q

Under this method, accounts receivable and sales are initially recorded at amounts net of cash discounts.

A

Net Method

32
Q

Accounts receivale are measured at what value?

A

Net Realizable Value (NRV)

33
Q

Given to encourage prompt payment. It is deducted from the invoice price when determining the net amount collectible within the discount period.

A

Cash Discount

34
Q

Two methods to account for cash discount.

A
  • Gross Method
  • Net Method
35
Q

The contra-asset account of accounts receivable.

A

Allowance for Doubtful Accounts

36
Q

A balance sheet account representing estimated uncollectible receivables.

A

Allowance for Doubtful Accounts

37
Q

An income statement account representing the cost of uncollectible accounts for a specific period.

A

Bad Debts Expense

38
Q

Two methods of accounting for bad debts.

A
  • Allowance Method
  • Direct Write-off Method
39
Q

Under this method, an allowance is recognized for bad debts expense when the collectibility of accounts becomes doubtful or questionable.

A

Allowance Method

40
Q

Under this method, bad debts expense is directly written-off from the balance of accounts receivable only when the accounts are deemed worthless.

A

Direct Written-off Method

41
Q

What is the journal entry for allowance method?

A

Debit - Allowance for Doubtful Accounts
Credit - Accounts Receivable

42
Q

What is the journal entry for direct written-off method?

A

Debit - Bad Debt Expense
Credit - Accounts Receivable

43
Q

The process of removing uncollectible amounts from the accounts receivable ledger.

A

Write-offs

44
Q

The amounts collected from previously written-off accounts receivable.

A

Recoveries

Intermediate Accounting (1 decks)

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