Accounting Chapter 6

  1. Account Receivable
    An amount owed by a customer who has purchased the company's product or service.
  2. Net realizable value
    The amount of cash that a company expects to collect from its total accounts receivable.
  3. Bad debt expense
    The expense resulting from the inablility to collect accounts recievable.
  4. Direct write-off method
    Method in which bad debt expense is recorded when a compnay determines that a receivable is uncollectible and removes it from its records.
  5. Allowance method
    Method in which companies use 2 entries to account for bad debt-expense-One to estimate the expense and a second to write off receivables.
  6. Allowance for bad debts
    The dollar amount of receivables that a company believes will ultimately be uncollectible.
  7. Percentage-of-sales approach
    Method that estimates bad debt expense as a percentage of sales.
  8. Percentage-of-receivables approach
    Method that estimates bad debt expense as a percentage of receivables.
  9. Aging Schedule
    A listing of accounts receivable by their ages.
  10. Receivables turnover ratio
    A comparison of credit sales to receivables that mesures a company's ability to generate and collect receivables.
  11. Days-in-receivables ratio
    A conversion of the receivables turnover ratio that expresses a company's ability to generate and collect receivables in days.
  12. Allowance ratio
    A comparison of the allowance account to receivables that measures the percentage of recivables that are expected to be uncollectible in the future.
  13. Promissory Note
    A written promise to pay a specific sum of money on demand or at some specific dat in the future.
  14. Note receivable
    An asset created when a company accepts a promissory note.
Card Set
Accounting Chapter 6
Accounting: Chapter 6: Receivables