Test 3: Accounts Receivable Flashcards
Accounts Receivable
the current asset that is created when a sale or
service transaction is executed on a credit basis.
A credit-granting
policy is a policy that a company follows to decide which customers should be allowed to buy goods and services on credit and how much credit those customers should be granted.
credit-collection policy;
that is, a policy establish-
ing the amount of time that its customers may take before they are required to pay their outstand accounts rec
Bad Debts Expense
a credit loss that is an operating expense of a business
Look at the allowance method
ok
percentage of net sales method
estimated uncollectible percentage only to its credit sales, excluding cash sales, since only
credit sales are subject to credit losses.
accounts receivable aging method
Adding any existing debit balance or subtracting
any existing credit balance in the allowance account to the year-end projected Allowance
for Doubtful Accounts balance, it is possible to indirectly determine the appropriate current
period estimate of the company’s bad debts expense
aging schedule
simply an analysis that reveals how much time has elapsed
since a credit sale originally occurred, and consequently, how long a customer’s account receivable has remained unpaid.
credit card fee
usually ranges from one percent to five percent of the amount of the credit card purchase.
promissory note
is a written promise to pay a certain sum of money on
demand or at a fixed (or determinable) future date
Who signs the promissory note?
The maker
What does the maker do?
Makes the promissory note payable to either the bearer or payee
What is a note from a debitor?
A note receivable, stronger than an account receivable
What is maturity?
when a debt has to be paid (look at all of that in the book)
Accounts
Receivable Turnover
indicates how many times a year a firm collects its average accounts receivable (how fast accounts receivable are being converted into cash)
ACTS REC TO=NET SALES/AVG ACTS REC (NET)
