module 7- accounts receivable

Question 1

accounts receivable

Answer 1

companies offer for short term credit with no interest charge (current asset)

Question 2

notes receivable

Answer 2

companies sometimes extend for both short and long-term credit with an interest charge

Question 3

accounts receivable ledger

Answer 3

(where notes and accounts receivable are recorded). includes items such as the customer information, the date of sale, and any terms that are associated with the sale on account. at the end of the period this is reflected on the balance sheet

Question 4

direct write off method

Answer 4

-used by companies that do not have many credit sales.
-does not adhere to matching principle
-bad debts are recorded when they are deemed to be uncollectible.
-recorded as:
Bad debit expense- debit
accounts receivable-credit

Question 5

contra account

Answer 5

account linked with another account and having an opposite normal balance(debit or credit) reported as a subtraction from the other account balance

Question 6

net realizable value

Answer 6

is the amount the company expects to collect from accounts receivable after uncollectible accounts are taken into consideration

Question 7

Estimating uncollectible accounts

Answer 7

1. percentage-of-sales method (income statement)

2. percentage-of-receivables method (balance sheet)

Question 8

Percentage of sales method (income statement approach)

Answer 8

the method is based on a percentage of prior years’ actual uncollectible accounts to the prior years’ credit sales.
to make journal entry:
- uses allowance for doubtful accounts and accounts receivable(asset)

Question 9

percentage of receivables method (balance sheet)

Answer 9

estimates uncollectible accounts by determining the desired size of the allowance for uncollectible accounts

• aging accounts
• allowance for doubtful accounts
• bad debt expense

Question 10

allowance(deduction) for doubtful accounts

Answer 10

is a contra asset account used to offset the A/R balance on the balance sheet.

Question 11

allowance(deduction) for uncollectible accounts.

Answer 11

(income statement method) estimates a percentage about what the company thinks will not be payed from their credits and put that money into a (bucket) which is the allowance account.

• contra asset account
• it decreases the amount of your receivables.

Question 12

Bad debt expense/ Uncollectible expense accounts

Answer 12

This account is used to reverse the sale that wasn’t paid because we have to credit AR and debit Bad debt expense

Question 13

direct write off method

Answer 13

this method instead of estimating just writes off whatever wasn’t payed and
debits bad debt expense and credits account receivable.
- cant do it like this all the time because it violates GAP principles

Question 14

aging schedule

Answer 14

classifies accounts receivable according to how long they have been outstanding and uses a different uncollectibility percentage rate for each aging category.

Question 15

Uncollectible accounts recovered (write off method)

Answer 15

reverse it by:
1. debiting accounts receivable and crediting allowance for uncollectible accounts for the amount received.
2. debit to cash (the amount received)
and credit to accounts receivable

Question 16

sales allowances account

Answer 16

is a contra revenue account, used by businesses like the stores to track sales allowances given to customers for merchandise with minor flaws that were returned