Revenues and Adjustments
Allowances and Bad Debts
Notes and Ratios
Inventory Systems
Valuation and Cost Flow
100

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?

100

Under GAAP, companies must use this method to estimate future uncollectible accounts in the same period credit sales occur

What is the Allowance Method?

100

Unlike standard accounts receivable, notes receivable are formal credit arrangements evidenced by this written debt instrument

What is a Promissory Note (or Note)?

100

For a manufacturing business, this inventory account represents fully completed goods that are ready for sale but not yet sold

What is Finished Goods?

100

This inventory cost flow assumption assumes that the earliest units purchased are the first ones sold

What is FIFO (First-In, First-Out)?


200

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?

200

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?

200

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?

200

The inventory cost equation states that Beginning Inventory plus Purchases equals this total figure

What is Cost of Goods Available for Sale?

200

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?

300

In the shorthand credit terms "2/10, n/30," this number represents the discount percentage offered

What is 2%?

300

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)?

300

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?

300

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?

300

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)?

400

Total revenue minus these three contra revenue accounts equals Net Revenues on the income statement

What are Sales Returns, Sales Allowances, and Sales Discounts?

400

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?

400

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?

400

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?


400

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?

500

When an unsatisfied customer receives a price reduction without physically returning the merchandise, the seller debits this contra-revenue account

What is Sales Allowances?

500

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?

500

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?

500

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)?

500

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)?