accounting test 2

  1. net realizable value
    face value minus allowance for doubtful accounts
  2. allowance for doubtful accounts
    estimated value of accounts recievable that will not be collected
  3. reinstate
    reversing write off
  4. contra asset account
    account subtracted from another asset account
  5. uncollectible accounts expense
    expense assosciated with uncollectible accounts recievable
  6. percent of revenue method
    estimating the amount of uncollectible accounts expense as a percentage of the revenue earned during the accounting period
  7. percentage of receivables method
    estimating the amount of the allowance for doubtful accounts as a percentage of the outstanding receivables balance; longer an account receivable is outstanding, the less likely it is to be paid
  8. aging of accounts receivable
    classigying each account recievable by the number of days it has been outstanding
  9. promissory note
    a legal document respresenting a credit agreement between a lender and a borrower
  10. maker
    borrower; must pay note on due date
  11. payee
    person to whom the note is made payable; lender
  12. principal
    amount of money loaned
  13. interest
    economic benefit earned for loaning the principal
  14. maturity date
    date on which the maker must repay and make final interest payment
  15. collateral
    assets belonging to the maker that are assigned as security to ensure everything is paid
  16. accrued interest
    interest that has been recognized before cash is exchanged
  17. adjusting entry
    updates the account balances prior to preparing financial statements
  18. matching concept
    revenue is recognized in the period in which it is earned regardless of when the related cash is collected
  19. liquidity
    how quickly assets are expected to be converted to cash during normal operations
  20. special identification inventory method
    each particular piece of inventory has the cost of good sold that that particular inventory costed (VIN #s for cars)
  21. FIFO
    first in, first out; the costof the iems purchased first are asigned to cost of goods sold
  22. LIFO
    last in, first out; cost of the items purchased last be charged to cost of good sold
  23. weighted average inventory method
    assigns the average cost of the items available to cost of goods sold
  24. physical flow of goods
    actual physical movement of goods through the business, usually FIFO
  25. lower of cost or market (LCM)
    if the market price is lower than its purchase price, use which ever is lower
Card Set
accounting test 2
accounting chapters 5-9