Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Accounting 100 > Chapter 8 > Flashcards

Chapter 8 Flashcards

1
Q

sales returns/discounts

A

reduce the accounts receivable balance, since the company will no longer be receiving the payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Sales Discounts Journal Entry

A

Dr Cash
Dr Sales Discount
Cr A/R

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Sales R/A Journal Entry

A

Dr Sales R/A

Cr A/R

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

estimated uncollectibles

A

estimated amount of claims on customers that companies expect will be uncollectable in the future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

when does a write off occur?

A
  1. after a company exhausts all means of collecting a past due account and collection appears unlikely
  2. if a customer is unable to pay the company the amount due
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

net realizable value

A

the net amount a company expects to receive in cash from receivables

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

direct write off method for uncollectables

A

bad debts are not estimated/accounts are written off when deemed uncollectable
NOT acceptable under US GAAP-doesn’t follow expense recognition principle/no way to tell the amount of the a/r balance that will actually be realized on the balance sheet since we are directly crediting the a/r

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

journal entry for the direct write off method

A

Dr Bad Debt Expense

Cr A/R

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

allowance method for uncollectables

A

at the end of ever reporting period a company estimates the value of accounts that will be uncollectable- follows the expense recognition principle

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

journal entry for the allowance method for uncollectables

A

Dr Bad Debt Expense

Cr Allowance for Doubtful Accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Allowance for Doubtful Accounts Account

A

contra-asset account (normal cr balance)

this acount allows for the a/r account to be displayed at its cash net realizable value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Bad Debt Expense

A

classified as an operating expense on the income statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

journal entry for when estimations are actually uncollectable and must be written off

A

Dr Allowance for Doubtful Accts

Cr A/R

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

recovering a written off account

A

if a previously written off account is later collected we must reverse the write off account and record the cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

journal entry for recovering a written off account

A

Dr A/R
Cr Allowance for Doubtful Accts
Dr Cash
Cr A/R

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

balance sheet order for current assets

A

cash
a/r
less allowance for doubtful accts
etc

17
Q

options for estimating balance of allowance for doubtful accts

A

% of receivables

aging schedules

18
Q

does the allowance for doubtful accounts account get closed out at the end of the period?

A

NOOOO

19
Q

how to find the amount to fill in for allowance for doubtful accts or bad debt expense

A

current balance-ending balance-find the whole
Dr BDE
Cr A4DA

20
Q

notes receivable

A

promissory:written promise to pay a specified amount of money on demand or at a definite time

21
Q

when are notes receivable used?

A
  1. when individuals or companies lend or borrow money
  2. when the amount of the transaction and the credit period exceed normal limits
  3. in settlement of an a/r
22
Q

maturities

A
  1. on demand
  2. on a stated date
  3. at the end of a stated period of time
23
Q

Equation for computing interest

A

(face value of the note) x (annual interest rate) x (time in terms of one year-360 days)

24
Q

recognizing notes receivable

A
  1. recognized when formally accepted by the company
  2. initially recorded at face value
  3. interest revenue is not reported when the company accepts the note because the revenue recognition principle does not recognize revenue until earned (interest is earned, accrued, as time passes)
25
Q

Journal entry for recognizing a note receivable

A

Dr N/R

Cr A/R

26
Q

valuing a ______ n/r is the same as valuing ________

A

short-term; a/r

n/r are reported at their cash (net) realizable value and have an allowance acct (A4DA)

27
Q

disposing of notes

A
  1. notes may be held to their maturity (honored)
  2. notes may be sold (speeds collection of cash)
  3. maker of the note may default (dishonored)
28
Q

managing a/r

A
  1. determine to whom to extend credit
  2. establish a payment period
  3. monitor collections
  4. evaluate the liquidity of receivables
  5. accelerate cash receipts when necessary (sale of receivables)
29
Q

receivables turnover ratio

A
  1. liquidity ratio
  2. measures the number of times, on average, a company collects receivables during the period
    = (net cr. sales)/(average et receivables)
30
Q

average collection period

A
  1. assess effectiveness of credit/collection policies
  2. collection period should not exceed credit term period
    (365) / Receivable turnover ratio
31
Q

3 reasons for the sale of receivables

A
  1. size of receivable
  2. receivables may be the only reasonable source of cash
  3. billing/collection are often time consuming and costly
32
Q

National Cr Card Sales

A
  1. issuer does cr investigation of customer
  2. issuer maintains customer accts
  3. issuer undertakes collectio process/absorbs any losses
  4. retailer receives cash more quickly from cr card issuer
33
Q

Cr Card journal entry

A

Dr Cash
Dr Service Charge
Cr Sales Revenue

34
Q

basic principle of cash management

A
  1. increase the speed of receivables collection-offer a discount
  2. keep inventory levels low-remember just in time inventory
  3. monitor payment of liabilities
  4. plan timing of major expenditures
  5. invest in idle cash
35
Q

liquid investment

A

someone always willing to buy/sell the investment

36
Q

risk free investment

A

no concern that the part will default on its promise to pay the principle and interest

Accounting 100 (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions