Chapter 8 Terms Flashcards
Accounts receivable
Amounts owed by customers on account.
Aging schedule
A list of accounts receivable organized by the length of time they have been unpaid.
Allowance for Doubtful Accounts
A contra asset account that is deducted from gross accounts receivable to report receivables at their carrying amount.
Allowance method
The method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period.
Bad debt expense
An expense account to record uncollectible receivables.
Carrying amount
The value reported for accounts receivable in the statement of financial position (balance sheet). It is the total amount of accounts receivable minus allowance for doubtful accounts.
Collection period
The average number of days that receivables are outstanding. It is calculated by dividing 365 days by the receivables turnover.
Default
What happens when the maker of the note does not pay the note in full. Also referred to as dishonouring the note.
Dishonoured note
A note that is not paid in full at maturity.
Gross accounts receivable
The total accounts receivable in the control account in the general ledger; includes both collectible and uncollectible accounts.
Maker
The party making the promise to pay a promissory note.
Notes receivable
Claims for which formal instruments (written instruments) of credit are issued as evidence of the debt.
Payee
The party to whom payment is to be made.
Percentage of receivables approach
The approach used to estimate uncollectible accounts where the allowance for doubtful accounts is calculated as a percentage of receivables.
Percentage of sales approach
An approach to estimating uncollectible accounts where bad debt expense is calculated as a percentage of net credit sales.
