Chapter 7 Terms

Question 1

Direct Write-off Method

Answer 1

Records loss from an noncollectable account receivable when it is determined to be noncollectable

Question 2

Allowance Method

Answer 2

Estimates bad debts expenses at the end of each accounting period and records it with adjusting entry

Question 3

Percent of Sales Method

Answer 3

= sales x noncollectable credit sales percent

Question 4

Percent of Receivables Method

Answer 4

= accounts receivable x noncollectable receivable percent

Question 5

Aging of Receivable Method

Answer 5

Same as percent of receivable method, but percents become higher as receivables age

Question 6

Promissory Note

Answer 6

A written promise to pay a specific amount

Question 7

Principal of a Note

Answer 7

Specific amount to be paid

Question 8

Maker of the Note

Answer 8

Person to pay specific amount back

Question 9

Payee of Note

Answer 9

A person who hands out specific amount of money.

Question 10

Interest

Answer 10

Charge of using the money until the due date

Question 11

Maturity Date of the Note

Answer 11

The day the note must be paid