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ACCT110 Ch 9
Accounting for Receivables
| Term | Definition |
|---|---|
| Accounts receivable | Amounts due from customers for credit sales; backed by the customer's general credit standing. |
| Accounts receivable turnouver | Measure of both the quality and liquidity of accounts receivable; indicates how often receivables are received and collected during the period; computed by dividing net sales by average accounts receivable. |
| Aging of accounts receivable | Process of classifying accounts receivable by how long they are past due for purposes of estimating uncollectible accounts. |
| Allowance for Doubtful Accounts | Contrac asset account with a balance approximating uncollectible accounts receivable ; also called Allowance for Uncollectible Accounts. |
| Allowance method | Procedure that estimates and matches bad debts expense with its sales for the period and/or reports accounts receivable at estimated realizable value. |
| Bad debts | Accounts of customer who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts. |
| Direct write-off method | Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts. |
| Interest | Charge for money (or other assets) loaned from one entity to another. |
| Maker of the note | Entity who signs a note and promises to pay it at maturity. |
| Matching (expense recognition) principle | Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses. |
| Materiality contstraint | Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP. |
| Maturity date of a note | Date when a note's principal and interest are due. |
| Payee of the note | Entity to whom a note is made payable. |
| Principal of a note | Amount that the signer of a note agrees to pay back when it matures, not including interest. |
| Promissory note (or note) | Written promise to pay a specified amount either on demand or at a definite future date; is a note receivable for the lender but a note payable for the lendee (borrower). |
| Realizable value | Expected proceeds from converting an asset into cash. |
| MACRS (Modified Accelerated Cost Recovery System) | Allows strght-line deprec'n for some assets-requires accelerated deprec'n for most assets-separates depreciable assets into different classes-defines depreciable life & rates for each-isn't acceptable for financial reporting. |
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