Revenues and Adjustments
This asset account is recorded at the time of a credit sale when goods or services are provided to a customer who promises to pay in the future
What is Accounts Receivable?
Under GAAP, companies must use this method to estimate future uncollectible accounts in the same period credit sales occur
What is the Allowance Method?
Unlike standard accounts receivable, notes receivable are formal credit arrangements evidenced by this written debt instrument
What is a Promissory Note (or Note)?
For a manufacturing business, this inventory account represents fully completed goods that are ready for sale but not yet sold
What is Finished Goods?
This inventory cost flow assumption assumes that the earliest units purchased are the first ones sold
What is FIFO (First-In, First-Out)?
Unlike sales returns or allowances, this reduction in list price given to encourage large bulk purchases is not recorded in a separate contra-revenue account
What is a Trade Discount?
Allowance for Uncollectible Accounts is classified as this type of account on the balance sheet, directly offsetting Accounts Receivable
What is a Contra-Asset account?
This basic formula is used to calculate total interest revenue earned on a note receivable
What is Face Value × Annual Interest Rate × Fraction of the Year?
The inventory cost equation states that Beginning Inventory plus Purchases equals this total figure
What is Cost of Goods Available for Sale?
This inventory cost flow assumption calculates a single unit cost by dividing the total cost of goods available for sale by the total number of units available for sale
What is Weighted-Average Cost?
In the shorthand credit terms "2/10, n/30," this number represents the discount percentage offered
What is 2%?
Writing off a specific uncollectible customer account under the allowance method has this net effect on total assets and net income
What is no effect (zero effect)?
The receivables turnover ratio measures this specific operational metric for a company
What is the number of times during a year the average accounts receivable balance is collected?
Under these shipping terms, title to inventory passes to the buyer as soon as goods leave the seller's warehouse, making the buyer responsible for freight
What is FOB Shipping Point?
During periods of rising inventory costs, this cost flow assumption yields the highest Cost of Goods Sold and the lowest Net Income
What is LIFO (Last-In, First-Out)?
Total revenue minus these three contra revenue accounts equals Net Revenues on the income statement
What are Sales Returns, Sales Allowances, and Sales Discounts?
If Allowance for Uncollectible Accounts has an unexpected credit balance prior to year-end adjusting entries, it indicates this about last year's estimate
What is: last year's estimate of bad debts was too high?
Calculated as 365 divided by the Receivables Turnover Ratio, this metric tells management how many days it takes on average to collect cash from credit sales
What is the Average Collection Period?
This inventory system continually updates Inventory and Cost of Goods Sold accounts at the exact time of each purchase and sale
What is a Perpetual Inventory System?
An inventory counting error that understates ending inventory in the current year has this effect on Cost of Goods Sold for that year
What is Overstating Cost of Goods Sold?
When an unsatisfied customer receives a price reduction without physically returning the merchandise, the seller debits this contra-revenue account
What is Sales Allowances?
The direct write-off method is generally not GAAP-compliant because it delays recording bad debt expense, causing receivables to be reported this way in the current year
What is Overstated?
If a firm has a receivables turnover ratio of 10 times per year, its average collection period is approximately this many days
What is 36.5 days?
Under a perpetual system, selling merchandise on credit requires two journal entries: one for Sales Revenue/Receivable and another for these two accounts
What are Cost of Goods Sold (debit) and Inventory (credit)?
This cost flow assumption is considered an income statement approach because it matches the most recent purchase costs against current sales revenues.
What is LIFO (Last-In, First-Out)?