Principles Of Accounting Chapter 9

Front 1

Accounts receivable

Back 1

short-term financial assets that arise from sales on credit at the wholesale or retail level.

Front 2

Accounts receivable aging method

Back 2

A method of estimating uncollectible accounts based on the assumption that a predictable proportion of each dollar of accounts receivable outstanding will not be collected.

Front 3

Aging of accounts receivable

Back 3

The process of listing each customer's receivable account according to the due date of the account.

Front 4

Allowance for Uncollectible Accounts

Back 4

A contra-asset account that reduces accounts receivable to the amount expected to be collected in cash. Also called Allowance for Doubtful accounts and Allowance for Bad Debts.

Front 5

Allowance method

Back 5

A method of accounting for uncollectible accounts by expensing estimated uncollectible accounts in the period in which the related sales take place.

Front 6

Available-for-sale securities

Back 6

Debt and equity securities that do not meet the criteria for either held-to-maturity or trading securities.

Front 7

Average days'sales uncollected

Back 7

A ratio that shows on average how long it takes to collect accounts receivable; 365 days divided by receivable turnover.

Front 8

Cash

Back 8

coins and currency on hand, checks and money orders from customers, and deposits in bank checking and savings accounts.

Front 9

Cash equivalents

Back 9

Short-term investments that will revert to cash in 90 days or less from the time they are purchased.

Front 10

Compensating balance

Back 10

a minimum amount that a bank requires a company to keep in its bank account as part of a credit-granting arrangement.

Front 11

Contingent liability

Back 11

A potential liability that can develop into a real liability if a particular subsequent event occurs.

Front 12

Direct charge-off method

Back 12

A method of accounting for uncollectible accounts by directly debiting an expense account when bad debts are discovered instead of using the allowance method; this method violates the matching rule but is required for federal income tax computations.

Front 13

Discounting

Back 13

A method of selling notes receivable in which the bank deducts the interest from the maturity value of the note to determine the proceeds.

Front 14

Dishonored note

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A promissory note that the maker cannot or will not pay at the maturity date.

Front 15

Duration of note

Back 15

the length of time in days between a promissory note's issue date and its maturity date.

Front 16

Electronic funds transfer (EFT)

Back 16

The transfer of funds from one bank to another through electronic communication.

Front 17

Factor

Back 17

An entity that buys accounts receivable.

Front 18

Factoring

Back 18

The selling or transferring of accounts receivable.

Front 19

Held-to-maturity securities

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Debt securities that management intends to hold to their maturity or payment date and whose cash value is not needed until that date.

Front 20

Installment accounts receivable

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Accounts receivable that are payable in a series of time payments.

Front 21

Interest

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The cost of borrowing money or the return for lending money, depending on whether one is the borrower or the lender.

Front 22

Marketable securities

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Short-term investments intended to be held only until needed to pay current obligations. Also called short-term investments.

Front 23

Maturity date

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the date on which a promissory note must be paid.

Front 24

Maturity value

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The total proceeds of a promissory note--principal plus interest--at the maturity date.

Front 25

Notes payable

Back 25

Collective term for promissory notes owed by the entity (maker) who promises payment to other entities.

Front 26

Notes payable

Back 26

Collective term for promissory notes owed by the entity (maker) who promises payment to other entities.

Front 27

Notes receivable

Back 27

collective term for promissory notes held by the entity to whom payment is promised (payee).

Front 28

Percentage of net sales method

Back 28

A method of estimating uncollectible accounts based on the assumption that a predictable proportion of each dollar of sales will not be collected.

Front 29

Promissory note

Back 29

An unconditional promise to pay a definite sum of money on demand or at a future date.

Front 30

Quick ratio

Back 30

A ratio for measuring the adequacy of short-term financial assets; short-term financial assets divided by current liabilities.

Front 31

Receivable turnover

Back 31

A ratio for measuring the average number of times receiveables were turned into cash during an accounting period; net sales divided by average net accounts receivable.

Front 32

Securitization

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The grouping of receivables into batches for sale at a discount to companies and investors.

Front 33

Short-term financial assets

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Temporary investments of excess cash that are intended to be held only until they are needed to pay current obligations. also called marketable securities.

Front 34

Trade credit

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Credit granted to customers by wholesalers or retailers.

Front 35

Trading securities

Back 35

Debt and equity securities bought and held principally for the purpose of being sold in the near term.

Front 36

Uncollectible accounts

Back 36

Accounts receivable owed by customers who cannot or will not pay. Also called bad debts.