Receivables and Revenue
This represents the amount of cash owed to a company by its customers from the sale of goods or services on account.
What is Accounts Receivable?
This is a contra asset account used to estimate the amount of accounts receivable that will not be collected.
What is the Allowance for Uncollectible (or Doubtful) Accounts?
Unlike accounts receivable, these are formal credit arrangements evidenced by a written debt instrument.
What are Notes Receivable?
Three stages of inventory are typically reported by manufacturing companies: Raw Materials, Work in Process, and this.
What is Finished Goods?
This inventory method assumes the first units purchased are the first units sold.
What is FIFO (First-In, First-Out)?
These are reductions in the listed price of a good or service, often used to provide incentives to larger customers or consumer groups.
What are Trade Discounts?
This specific action is taken when a company determines a particular customer will not pay, reducing both Accounts Receivable and the Allowance account.
What is a Write-off?
To calculate this for a note, you multiply the Principal by the Interest Rate and the Fraction of the Year.
What is Interest Revenue?
This is the equation used to determine the cost of goods available for sale: Beginning Inventory plus this.
What are Purchases?
This inventory method assumes the last units purchased are the first units sold.
What is LIFO (Last-In, First-Out)?
This occurs when a customer returns a product after a credit sale, requiring the company to reduce the customer's balance.
What is a Sales Return?
This method of estimating uncollectible accounts considers the age of various accounts receivable, with older accounts having a higher estimated uncollectible percentage.
What is the Aging-of-Receivables Method?
This ratio is calculated by dividing net credit sales by average accounts receivable to show how many times a company collects its receivables in a year.
What is the Receivables Turnover Ratio?
On a multiple-step income statement, this is the result of subtracting Cost of Goods Sold from Net Sales.
What is Gross Profit?
This costing method calculates a new average cost every time a purchase is made.
What is Weighted Average Cost?
This is the resulting figure after reducing total revenues by sales returns, allowances, and discounts.
What is Net Revenue?
This method of accounting for bad debts is generally not allowed under GAAP because it causes a timing difference in expense recognition.
What is the Direct Write-off Method?
This metric is calculated as 365 days divided by the receivables turnover ratio.
What is the Average Collection Period?
This term describes the physical transfer of inventory ownership when the buyer pays the freight costs.
What is FOB Shipping Point?
During periods of rising prices, this inventory method results in the highest Net Income.
What is FIFO?
Under this method, a company records a sale but also recognizes the transfer of inventory as part of the full transaction.
What is a Perpetual Inventory System transaction?
These types of ledgers contain the individual accounts of all customers, which must equal the total in the general ledger control account.
What are Subsidiary Ledgers?
This must be recorded at the end of an accounting period for a note that spans two periods, even if no cash has been received yet.
What is an Adjusting Entry for Accrued Interest?
If ending inventory is overstated in the current year, this will be the effect on the Cost of Goods Sold in the same year.
What is Understated?
During periods of rising prices, this inventory method results in the lowest Income Tax expense.
What is LIFO?