Chapter 7 Accounting

Front 1

accounts recievable turnover rate

Back 1

a ratio used to measure the liquidity of accounts recievable and hte reasonableness of the accounts recievable balance. computed by dividing net sales by average receivables

Front 2

aging the accounts recievable

Back 2

the process of classifying accounts receivable by age groups such as currents, 1-30 days past due, 31-60 days past due ect. a step in estimating the uncollectible portion of the accounts receivable

Front 3

allowance for doubtful accounts

Back 3

a valuation account or contra-asset account relating to accoutns receivable and showing the portion of the receivables estimated to be uncollectible.

Front 4

bank reconciliation

Back 4

an analysis that explains the difference between the balance of cash shown in the depositor's records

Front 5

cash equivalents

Back 5

very short-term investments that are so liquid that they are considered equivalent to cash. examples include money market funds, us treasury bills, certificates of deposit and commercial papter. these investments must mature w/in 90 days of acquisition

Front 6

cash management

Back 6

planning, controlling, and accoungint for cash transactions and cash balances

Front 7

compensating balance

Back 7

a minimum average balance that a bank may require a borrower to leave on deposit in a non-interest-bearing account

Front 8

conservatism

Back 8

a traditional practice of resolving uncertantices by choosing an asset valuation at the lower end of the range or reasonableness. also refers to the policy of postponing recognition of revenure to a later date then a range or rasonable choises exists. designed to avoid overstatements of financial strength and earnings

Front 9

default

Back 9

failure to pay intrest or principal of a promisory note at the duedate

Front 10

direct write-off method

Back 10

a methor of accoungint for uncollectible receivables in which no expense is recognized until individual accounts are determined to be worthless. at that point the account receivable is written of, with an offsetting devit to uncollectible accounts expense. fails to match revenue and related expenses.

Front 11

factoring

Back 11

transactions in which a business either sells its accounts receivable to a financial institustion (often called a factor) or borrows money by pledging its accounts receivable as collateral

Front 12

financial assets

Back 12

cash and assets convertable directly into known amounts of cash (such as marketable securities and receivables

Front 13

gain

Back 13

an increase in owenr's equity resulting from a transaction other than earning revenue or investment by the owenrs. the most common example is the sale of an asset at price above book value

Front 14

line of credit

Back 14

a prearranged borowing agreement in which a bank stands ready to advance the borrower without delay any amount up to a specified credit limit. once used, a line of credit becomes a liability. the unused portion of the line represetn the ability to borrwo cash with out delay.

Front 15

loss

Back 15

a decrease in owners' equity resulting from any transaction other than an expense or a distribution to the ownwers. the most common example is the sale of an asset at a price below book value

Front 16

marketable securities

Back 16

highly liquid investments, primarily in stocks and bonds, that can be sold at quoted market prices in organzied securities exchanges

Front 17

market-to-market

Back 17

the balance sheet valuation standard applied to investments in marketable securities. Involves adjusting the control account for securities owned to its total market value at each balance sheet date. (represents an exception to the cost principle)

Front 18

maturity date

Back 18

the date on which a note becomes due and payable

Front 19

maturity value

Back 19

the value of a note at its maturity date, consisting of principle plus intrest

Front 20

net realizable value

Back 20

the balance sheet valuation standard applied to receivables. Equal to the gross amount of accounts and notes receivable, less an extimate of the portion that may prove to be uncollectible

Front 21

NSF check

Back 21

a customer's check that was deposited but returned because of lack of funds (Not Sufficient Funds) in the account on which the check was drawn.

Front 22

Unrealized Holding Gain (or Loss) on Investment

Back 22

A stockholder's equity account representing the difference between the cost of investments owned and their market value at the balance sheet date. In short, gains or losses on these investments that have not been "realized" through the sale of the securities