Revenues, Receivables, and Operating Income Flashcards
When a company consolidates a subsidiary that it controls, but for which holds less than 100% ownership, it’s called the _____________________________.
net income attributable to non controlling interests
When customers owe the company money for sales or services already provided (generally a current asset), it goes under ____________ _________________.
accounts receivable
What is the major risk of selling on credit versus selling with cash only?
customers may not pay
What is the allowance method?
when companies are required to estimate the amount that they expect their customers to not pay, represented as a contra-asset called an uncollectible account
Estimated uncollectible accounts _____ assets and ________ expenses.
reduce assets, increase expenses
What are the two methods for estimating how much a company expects the customers will not pay?
aging analysis and percentage of sales analysis
The longer past due an accounts receivable is, the ______ likely it is to be uncollectible.
more
How do you record the allowance for uncollectible accounts?
debit the bad debt expense, credit the allowance for uncollectible accounts
When it becomes clear a customer will not pay, the company ______ ____ the customer’s account balance as uncollectible.
writes off
A write off ________ the balance of accounts receivable and _________ the balance of allowance for uncollectible accounts.
reduces for both
Does the write off have an effect on total assets (balance sheet) or total expenses (income statement)?
NO
What happens if the actual uncollectible accounts differ in amount from estimated uncollectible accounts?
you have to record this as an annual adjustment
What are a few examples of things a company would have to disclose in a footnote disclosure?
accounting policies around receivables, allowance for uncollectible accounts balance, risks + uncertainties, credit quality information, assets serving as collateral
Using receivables as collateral for a loan, disclosed in a company’s footnotes and presented in the liabilities section of the balance sheet as a short-term loan, is known as ________.
pledging
Selling receivables to a bank or other financial institution, where receivables are removed from the balance sheet if sold, is known as ____________.
factoring
