Chapters 8-9

Question 1

What is the is the definition and ratio for accounts recievable turn over

Answer 1

An accounting measure used to quantify a firm’s effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

Net Credit Sales/Average Accounts recievable

Question 2

What is aging the account recievable?

Answer 2

is a report that lists unpaid customer invoices and unused credit memos by date ranges. The aging report is the primary tool used by collections personnel to determine which invoices are overdue for payment

Question 3

What is the allowance method?

Answer 3

Allowance Method. Percentage of total accounts receivablemethod. One way companies derive an estimate for the value of bad debts under theallowance method is to calculate bad debts as a percentage of the accounts receivable balance.

Question 4

What is average collection period?

Answer 4

The approximate amount of time that it takes for a business to receive payments owed, in terms of receivables, from its customers and clients.

Credit Sales/Days

Question 5

What is bad debt expense?

Answer 5

An entry found on a business’s income statement that represents the amount of noncollectable accounts receivable that occurs in a given period. In terms of accounting entries, every time an amount increases bad debt expense, an equivalent amount is credited to the business’s allowance for bad debts.

Question 6

What is cash (net) realizable value?

Answer 6

n this situation, NRV is the amount of accounts receivable that is expected to turn to cash. Net realizable value sometimes refers to the balance in the general ledger account Accounts Receivable minus the balance in the account Allowance for Doubtful Accounts (or Allowance for Uncollectible Accounts.)

Question 7

What is notes receivable

Answer 7

represents claims for which formal instruments of credit are issued as evidence of debt, such as a promissory note. The credit instrument normally requires the debtor to pay interest and extends for time periods of 30 days or longer.

Question 8

What is a promissory note

Answer 8

a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand.

Question 9

What is trade receivables?

Answer 9

are amounts billed by a business to its customers when it delivers goods or services to them in the ordinary course of business. These billings are typically documented on formal invoices, which are summarized in an accounts receivable aging report

Question 10

The addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property’s overall value or increases its useful life. Although the scale of the capital improvement can vary, capital improvements can be made by both individual homeowners and large-scale property owners.

Question 11

What is amortization

Answer 11

1. The paying off of debt with a fixed repayment schedule in regular installments over a period of time. Consumers are most likely to encounter amortization with a mortgage or car loan.
2. The spreading out of capital expenses for intangible assets over a specific period of time (usually over the asset’s useful life) for accounting and tax purposes. Amortization is similar to depreciation, which is used for tangible assets, and to depletion, which is used with natural resources. Amortization roughly matches an asset’s expense with the revenue it generates.

Question 12

What is copyright?

Answer 12

The ownership of intellectual property by the item’s creator. Copyright law gives creators of original ideas, art, etc. the exclusive right to further develop them for a given amount of time, at which point the copyrighted item becomes public domain.

Question 13

what is depreciable cost

Answer 13

Any type of asset that is eligible for depreciation treatment. Depreciable property can include vehicles, real estate, computers and office equipment, machinery and heavy equipment, and several other categories of assets. Depreciable property items tend to be long-term assets.

Question 14

what is depreciation?>

Answer 14

1. A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes.
2. A decrease in an asset’s value caused by unfavorable market conditions.

Question 15

what is a franchise?

Answer 15

A type of license that a party (franchisee) acquires to allow them to have access to a business’s (the franchisor) proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business’s name. In exchange for gaining the franchise, the franchisee usually pays the franchisor initial start-up and annual licensing fees.

Question 16

what is goodwill?

Answer 16

An intangible asset that arises as a result of the acquisition of one company by another for a premium value. The value of a company’s brand name, solid customer base, good customer relations, good employee relations and any patents or proprietary technology represent goodwill. Goodwill is considered an intangible asset because it is not a physical asset like buildings or equipment. The goodwill account can be found in the assets portion of a company’s balance sheet.

Question 17

what is impairments?

Answer 17

1. A reduction in a company’s stated capital.
2. The total capital that is less than the par value of the company’s capital stock.

Question 18

what are intangible assets?

Answer 18

An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today’s marketplace. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company’s patent, with no plans of extending the agreement, it would have a limited life and would be classified as a definite asset.

Question 19

What are ordinary repairs?

Answer 19

Expenditures to maintain the operating efficiency and expected productive life of the unity. fairly small amounts that occur throughout the service life

Question 20

what is a patent?

Answer 20

A government license that gives the holder exclusive rights to a process, design or new invention for a designated period of time. Applications for patents are usually handled by a government agency. In the U.S. the United States Patent and Trademark Office handles application and documentation.

Question 21

What is a plant asset?

Answer 21

A company asset that is vital to business operations but cannot be easily liquidated. The value of property, plant and equipment is typically depreciated over the estimated life of the asset, because even the longest-term assets become obsolete or useless after a period of time.

Depending on the nature of a company’s business, the total value of PP&E can range from very low to extremely high compared to total assets. International accounting standard 16 deals with the accounting treatment of PP&E.

Question 22

What is research and development cost?

Answer 22

A company asset that is vital to business operations but cannot be easily liquidated. The value of property, plant and equipment is typically depreciated over the estimated life of the asset, because even the longest-term assets become obsolete or useless after a period of time.

Depending on the nature of a company’s business, the total value of PP&E can range from very low to extremely high compared to total assets. International accounting standard 16 deals with the accounting treatment of PP&E.

Question 23

What is the straight line method?

Answer 23

method of computing amortization (depreciation) by dividing the difference between an asset’s cost and its expected salvage value by the number of years it is expected to be used.

Question 24

what is a trademark (trade name)

Answer 24

A symbol, word, phrase, logo, or combination of these that legally distinguishes one company’s product from any others. Any infringement on a trademark is illegal and therefore grounds for the company owning the trademark to sue the infringing party.