Chapter 4 Working Capital and its components Flashcards
1
Q
Under the aging method how do you calculate uncollectible accounts?
A
The balance in the allowance account is determined by multiplying receivables by the uncollectible percentage. The existing balance would be use to determine the expense for the year.
2
Q
What principal is “estimating uncollectible accounts expense using the ratio of past actual losses from uncollectible accounts to past net credit sales, adjusted for anticipated conditions?
A
Matching principal
3
Q
What is the difference between pledging and factoring recieviables?
A
When you factor receivables you sell them to someone else and they are responsible, if you pledge them, then you receive a loan that you pay back as you receivables come in.
