Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
27 Cards in this Set
- Front
- Back
|
Receivable |
A monetary claim against a business or individaul |
|
|
Debtor |
The party that takes on the obligation (the person paying on credit) |
|
|
What are the 3 types of receivables? |
1. Accounts receivable 2. Notes receivable 3. Other |
|
|
Accounts Receivable |
The right to receive cash in the future from a customer for good and services rendered |
|
|
Notes Receivable |
A written promise that a customer will pay a fixed amount of principal plus interest by a certain date in the future - if it is due in a year or less it is counted as a current asset |
|
|
Maturity date |
The date when the note is due |
|
|
Promissory Note |
A written document that serves as evidence that the debt is signed and recognized by the debtor |
|
|
Subsidiary Accounts |
Separate customer accounts receivable |
|
|
Bad Debts Expense |
The cost to the seller of extending credit. It comes from not being able to collect on some of the credit cards customers |
|
|
Direct Write-Off Method |
A way to account for uncollectible receivables - the company records "bad debts expense" when this happens...companies have the option of turning these bad debts over to legal to affect the credit of the debtor |
|
|
Allowance Method |
A method of accounting for uncollectibles. The company estimates the bad debt expense instead of waiting to see which customers wont end up paying |
|
|
Net Realizable Value |
The net value a company expects to collect from its account receivable Accounts Receivable - allowance for bed debts |
|
|
What are the 3 basic ways to estimate un-collectibles? |
1. Percent of sales 2.Percent of receivables 3. Aging of receivables |
|
|
Percent of Sales method for uncollectibles |
Computes a percentage of net credit sales as the bad credit allowance amount (some companies use a percentage of ALL sales). |
|
|
Percent of receivables method for uncollectibles |
Computes a percentage of the ending unadjusted balance in the accounts receivable account instead of net credit sales |
|
|
Aging of receivables Method for uncollectibles |
A method of grouping individual debt accounts by how old they are then applying a different percentage to the group depending on it's age to determine the amount in the account for bed debt |
|
|
Principal |
The amount loaned to a borrower |
|
|
Interest |
The revenue to the payee for loaning the money - it is an expense to the debtor |
|
|
Interest Period |
The period of time during which the interest is computed (original date of the loan to the maturity date) |
|
|
Interest Rate |
The percentage rate of interest specified by the note |
|
|
Maturity Value |
The sum of the principle plus interest due at maturity |
|
|
When counting the days remaining for a note it is important to remember..... |
1. count the date of maturity 2. do not count the day the loan was originated (issued) |
|
|
What is the formula for computing interest on a note? |
principal x interest rate x time ex. $1000 x .06% x 12/12 = $60 |
|
|
Acid Test ("Quick") Ratio |
cash(etc) + ST investments + Net Current Recv's. ________________________________________________ Total Current Liabilities |
|
|
What is the acceptable/"safe" Acid Test Ratio? |
1 |
|
|
Accounts Receivable Turnover Ratio |
A ratio that measures the number of times the company collects the average AR balance in a yr. = Net Credit Sales/Avg. net AR the higher this ratio - the faster the company is collecting their cash |
|
|
Days Sales in Receivables Ratio ("Collection Period) |
How many days t takes to collect the average level of accounts receivable - the shorter the collection period the more quickly a company has to collect the cash 365 days / accounts receivable turnover ratio |
