Accounting Chapter 6

Front 1

Credit Card Discount

Back 1

Fee charged by the credit card company for its services

Front 2

Sales Discount (Cash Discount)

Back 2

A cash discount offered to encourage prompt payment of an account receivable

Front 3

Sales Returns and Allowances

Back 3

A reduction fo sales revenues for return of or allowances for unsatisfactory goods

Front 4

Accounts Receivable (Trade Receivables, Receivables)

Back 4

Open accounts owed to the business by trade customers

Front 5

Notes Receivable

Back 5

Written promises that require another party to pay the business under specified conditions (amount, time, interest)

Front 6

Trade Receivables

Back 6

Receivables created in the normal course of business when a sale of merchandise or services on credit occurs

Front 7

Nontrade Receivable

Back 7

Transactions other than the normal sale of merchandise or services

Front 8

Some companies report only ________ because they are current assets

Back 8

Trade Receivables

Front 9

Subsidiary Account

Back 9

Separate accounts receivable account for each retailer that resells its footwear and apparel

Front 10

Allowance Method

Back 10

Measures bad debt expense. Based on estimates of the expected amount of bad debts:

1. Make end-of-period adjusting entry tor ecord estimated bad debt expense
2. Write off specific accounts determined to be uncollectible during the period

Front 11

Bad Debt Expense

Back 11

(Doubtful Accounts Expense, Uncollectible Accounts Expense, Provision for Uncollectible Accounts) is the expense associated with estimated uncollectible accounts receivable

Front 12

how to record bad debt expense

Back 12

Bad debt expense (+E, -SE)...1000 debit
Allowance for doubtful accounts (+XA, -A)...1000 credit

Front 13

Allowance for Doubtful Accounts

Back 13

(Allownace for Bad Debts, allowance for Uncollectible Accounts) is a contra-asset account containing the stimated uncollectible accounts receivable

Front 14

Recording bad debt expenses (does/does not) decrease the net book value of Accounts Receivable and Total Assets

Back 14

does

Front 15

Writing off specific uncolletible accounts (does/does not) change the net book value of accounts receivable and income statement accounts

Back 15

does not

Front 16

Writing off specific uncollectible accounts

Back 16

Removing an account receivable after identifiying that it is uncollectible

Front 17

Recording bad debt expense (increases/decreases) the allowance for doubtful accounts

Back 17

Increases

Front 18

Ending Balance

Back 18

Beginning Balance + Bad Debt Expense Estimate - Write-Offs

Front 19

Aging of Accounts Receivable Method

Back 19

Estimates uncollectible accounts based on the age of each account receivable

Front 20

Receivables Turnover

Back 20

How many times average trade receivables are recorded and collected during the period:
Net Sales / Average Net Trade Accounts Receivable

Front 21

Gross Profit Percentage

Back 21

Measures a company's ability to charge premium prices and produce goods and services at low cost:
Gross Profit / Net Sales

Front 22

Cash

Back 22

Money or any instrument that banks will accept for deposit and immediate credit to a company's account, such as a check, money order, or bank draft

Front 23

Cash Equivalents

Back 23

Short-term investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change

Front 24

Internal Controls (def)

Back 24

Processes by which a compnay safeguards its assets and provides reasonable assurance garding the reliability of the compnay's financial reporting, the effectiveness and efficiency of its operations, and its compliance with applicable laws and regulations

Front 25

Internal control procedures should extend to...

Back 25

all assets: cash, receivables, investments, plant and equipment, etc.

Front 26

1. Separation of duties
2. Prescribed policieis and procedures

Back 26

effective internal control of cash should include...

Front 27

Bank Statement

Back 27

A monthly report from a bank that shows deposits recorded, checks cleared, other debits and credits, and a running bank balance

Front 28

Bank Reconciliation

Back 28

Process of verifying the accuracy of both the bank statement and the cash accounts of a business