Chapter 7 Flashcards
The total of estimated uncollectible accounts is calculated by analyzing accounts receivable according to how long each account has been outstanding.
AGING OF ACCOUNTS RECEIVABLE
A signed document where the debtor promises to pay the creditor the principal and interest on the due date.
PROMISSORY NOTE
The date a note begins accruing interest.
DATE OF A NOTE
The collective policies and procedures implemented by management to protect assets.
INTERNAL CONTROLS
The amount owed.
PRINCIPAL
Measures the liquidity of receivables and the efficiency of collection.
Net credit sales / Average accounts receivable
Average accounts receivable = beginning of the period balance plus the end of the period balance and dividing the sum by two.
ACCOUNTS RECEIVABLE TURNOVER
The fee for using the principal.
INTEREST
A method that calculates the total estimated uncollectible accounts as a percentage of the outstanding accounts receivables balance.
SIMPLIFIED BALANCE SHEET METHOD
A method of estimating uncollectible accounts where a process called aging of accounts receivable is used.
BALANCE SHEET METHOD
The period from the date of a note to the due date.
THE TIME OR TERM OF A NOTE
The outstanding deposits recorded by the company that have not been recorded by the bank when the bank statement is prepared.
DEPOSITS IN TRANSIT
A method to estimate bad debt expense based on credit sales. Bad debt expense is calculated by applying an estimated loss percentage to credit sales for the period
INCOME STATEMENT METHOD
The date on which the principal and interest must be paid.
DUE DATE OR MATURITY DATE
The process when an account determined to be uncollectible is removed from the accounts receivable account.
WRITE-OFF
A contra current asset account in the general ledger used to record estimated uncollectible receivables.
ALLOWANCE FOR DOUBTFUL ACCOUNTS (AFDA)
