Chapter 7 Key Terms and Definitions Flashcards
What are Accounts Recievable?
Amounts due from customers for credit sales; backed by the customers’s generalcredit standing.
What is the Allowance method?
Procedure that estimates and matches bad debts expense with its sales for the period and reports accounts receivable at estimated realizable value.
What are bad debts?
Accounts of customers who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts.
What is the direct write off method?
Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts.
What is interest?
Charge for using money or other assets loaned from one entity to another.
Who is the maker of the note?
Entity who signs a note and promises to pay it at maturity.
What is the materiality constraint?
Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP.
What is the maturity date of a note?
Date when a note’s principal and interest are due.
Who is the payee of the note?
Entity to whom a note is made payable.
What is the principal of a note?
Amount that the signer of a note agrees to pay back when it matures, not including interest.
What is a Promissory note?
Written promise to pay a specified amount either on demand or at a definite future date; is a note recievable for the lender, but a note payable for a lendee.
What is a realizable value?
Expected proceeds from converting an asset into cash.
