Accounting Chapter 8

Front 1

Receivables

Back 1

-amounts due from individuals and companies
-Receivables are claims that are expected to be collected in cash

Front 2

Accounts Receivable

Back 2

-amounts customers owe on account
-they result from the sale of goods and services.

Front 3

Notes Receivable

Back 3

-represent claims for which formal instruments of credit are issued as evidence of the debt
-the credit instrument normally requires the debtor to pay interest

Front 4

Trade Receivables

Back 4

-Notes and Accounts Receivable that result from sales transactions

Front 5

Other Receivables

Back 5

-include non-trade receivables such as interest receivable, loans to company officers, advances to employees, and income taxes refundable

Front 6

Bad Debts expense

Back 6

-an expense account to record losses from extending credit

Front 7

Direct write-off method

Back 7

-A method of accounting for bad debts that involves expensing receivable accounts at the time receivables from a particular company are determined to be uncollectible
-Dr. Bad Debts Expense
Cr. Accounts Receivable

Front 8

Allowance Method

Back 8

-A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period

Front 9

Cash (net) realizable value

Back 9

-The net amount a company expects to receive in cash from receivables

Front 10

Recording Estimated Uncollectible

Back 10

Dr. Bad Debts Expense
Cr. Allowance for doubtful Accounts

Front 11

Recording the Write-off of an Uncollectible Account

Back 11

Cr. Allowance for Doubtful Accounts
Dr. Accounts Receivable

Front 12

Recovery of an Uncollectible Account

Back 12

Dr. Accounts Receivable
Cr. Allowance For Doubtful Accounts

Dr. Cash
Cr. Accounts Receivable

Front 13

Percentage of Receivable Basis

Back 13

-A Method of estimating the amount of bad debt expense whereby management establishes a percentage relationship between the amount of receivables and the expected losses from uncollectible accounts

Front 14

Aging the Accounts Receivable

Back 14

-A schedule of customer balances classified by the length of time they have been unpaid
-the schedule is often called an aging schedule

Front 15

Promissory Note

Back 15

-A written promise to pay a specified amount of money on demand or at a determine time

Front 16

Computing Interest

Back 16

(Face value of Note) x (annual interest rate) x ( time in terms of one year)

Front 17

Recognizing Notes Receivable

Back 17

Dr. Notes Receivable
Cr. Accounts Receivable- Company

Front 18

Honor of Notes Receivable

Back 18

Dr.Cash
Cr.Notes Receivable
Cr. Interest Revenue

Front 19

Dishonored Note

Back 19

-A note that is not paid in full at maturity

Front 20

Managing Receivables 5 steps

Back 20

1. Determine to whom to extend credit
2. Establish a payment period
3. Monitor collections
4. Evaluate the liquidity of receivables
5. accelerate cash receipts from receivables when necessary

Front 21

Receivables Turnover Ratio

Back 21

-A measure of the liquidity of receivables

(net credit sales) / (average net receivables)

Front 22

Average Collection Period

Back 22

-The average amount of time that a receivable is outstanding

365 / Receivables Turnover Ration