Chapter 8 Receivables Flashcards
0
Q
Collection period
A
# of days it takes for company to collect receivables; 365 / Receivables turnover
1
Q
Receivable turnover ratio
A
Measures # times on average that receivables are collected during the period;
Net credit sales / Average Gross A/R
2
Q
Operating cycle in days
A
Measures average from time company purchases merch. to when it collects receivables;
Day sales in inventory + Collection period
3
Q
2 methods of accelerating cash receipts from receivables
A
- Loans secured by receivables - obtaining loans with receivables as collateral
- Sale of receivables to third party
4
Q
Types of receivables
A
A/R - within 30 days Notes Receivable - formal note, interest, 30 to 90 days or longer Other receivables (non-trade receivables) - HST recoverable, interest receivable, loans, recoverable income taxes, etc.
5
Q
Entry for nonbank credit card sales
A
A/R - Credit card company
Credit card expense
Sales
6
Q
Percentage of receivables approach (estimating uncollectible)
A
Management uses experience to estimate the percentage of receivables that will become uncollectible accounts
7
Q
T/F: Debit card and bank credit card sales are considered cash sales
A
True
