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Flashcards in Financial Accounting Chapter 5 Deck (50):
1

What is another name for accounting for short term investments

Marketable Securities

2

What are the 2 methods of estimating collectibles?

Percent of sales
Aging of receivables

3

What is the risk for extending credit to customers?

Some customers do not pay what is owed

4

Interest Formula

Principal x rate x time

5

Cost less than market price =

Unrealized loss

6

Investment revenue is from

Dividends or interest earned

7

Allowance Method

The estimated amount of uncollectible accounts

8

What is the time period of Accounting for short term investments?

1 year or less

9

In Notes Receivable terms what is Maturity Value?

Sum of principal and interest on note

10

In the allowance method what is recorded that reduces accounts receivable on the balance sheet?

A contra asset

11

Gains and losses are from....

Sales of Investments

12

What account goes on the balance sheet that is netted with accounts receivable?

Allowance for uncollectible accounts

13

Cost greater then market price =

Unrealized gain

14

What specific account goes on the income statement?

Uncollectible accounts expense

15

Percent of sales adjust allowance for uncollectible accounts by

The amount of uncollectible account expense

16

In Notes Receivable terms what is a principal?

Amount borrowed by debtor

17

What is reported on the balance sheet?

Trading investment

18

Contra-asset

Always paired with an asset and reduces its balance

19

Receivables

Monetary claims against others

20

What the difference between Accounts Receivable and Notes Receivable

Accounts Receivable
-Verbal promise

Notes Receivable
-written promise

21

What are 2 differences between realized and unrealized?

Realized
- Investment sold to third party
- Gain or loss = difference between selling price and cost

Unrealized
-Company still owns investment
- Gains or loss = difference between market value and cost

22

In Notes Receivable terms what is Interest

Cost of borrowing money

23

In Notes Receivable terms what is a creditor?

Party to whom money is owed

24

What 3 major things are included in the Direct Write Off Method?

Revenues do not match expenses
Uncollectible accounts expense used for write offs
No allowance for uncollectible accounts

25

What are the 3 categories of Accounting for Short Term Investments?

Trading Investments
Available for Sale
Held to Maturity

26

Unrealized gain or loss is from

Entry to adjust to market value

27

Unrealized Gains and Losses

Difference between market price and cost of investment at year-end

28

In Notes Receivable terms what is a Maturity Date?

Date debtor must pay the note

29

At year-end how are trading investments adjusted?

Adjusted to their equal market value

30

The allowance is used to

Absorb specific accounts that are determined to be uncollectible

31

Why is the direct write off method less preferred than allowance method? (2 things)

Does not match revenues with expenses
Accounts Receivable overstated

32

In Notes Receivable terms what is a debtor?

Party that owes money

33

What is the cost of extending credit to customers?

Uncollectible Accounts

34

What is overstated in the direct write off method?

Accounts Receivable

35

In Notes Receivable terms what is a creditor also known as?

Lender

36

Trading investments

Held for a short time and then sold

37

In Notes Receivable terms what is another name for a debtor?

Borrower

38

In Notes Receivable terms what is a term?

Length of time money is borrowed

39

What is the difference between percent of sales and aging of receivables?

Percent of Sales
Income Statement Approach

Aging of Receivables
Balance Sheet approach

40

What 3 things are reported on the income statement?

Gains and losses
Investment Revenue
Unrealized gain or loss

41

Aging of Receivables adjust allowance for uncollectible accounts by

The amount of uncollectible accounts receivable

42

In the allowance method what is always recorded as part of the adjusting process?

An Expense

43

If the cost is greater than the selling price it is a ----.

Gain

44

If the cost is less than the selling price it is a ----.

Loss

45

What is another name for a contra asset

Allowance

46

Bad Debt Expense

What we are not expected to receive from credit sales

47

What does bad debt expense always effect?

Allowance for undoubtful accounts

48

What is another name for allowance for undoubtful accounts?

Uncollectible accounts

49

What does bad debt expense always effect?

Allowance for undoubtful accounts

50

What is another name for allowance for undoubtful accounts?

Uncollectible accounts

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