Chapter 5 Flashcards
How do you find Net Revenue?
Total Sales Revenue - Sales Discounts - Sales Returns = Net Revenue
What is a sales discount?
Discounts companies offer if a customer pays their A/R balance quickly
What is a Uncollectible Accounts Receivable?
The estimation of cash that hasn’t been collected yet. Represents an Expense (cost) to the company. Also known as Bad Debt Expense
What is Allowance for Uncollectible Acccounts?
A contra asset account to Accounts Receivable in the balance sheet.
How to find Accounts Receivable?
Total Accounts Receivable - Allowance for Uncollectible Accounts = Accounts Receivable
How do you find the Receivables Turnover Ratio?
Net Credit Sales/Average Accounts Receivable
How do you find the Average Collection Period?
365/Receivables Turnover Ratio
The higher the receivables turnover ratio…
The better; higher means good
The lower the average collection period..
The better; lower means good
How do you find Actual Write Offs?
Beg. Balance + Bad Debt Expense - End. Balance = Actual Write Offs
When $2500 of accounts receivable are determined to be uncollectible, what should the company record to write offs the accounts using the allowance method?
Debit. Allowance for Uncollectible Accounts
Credit. Accounts Receivable
A company’s adjusting entry for uncollectible accounts at year-end would include a:
Debit. Bad Debt Expense
Credit Allowance For Uncollectible Accounts
