Ch 5-6: Accounting Principles: Chapters 5 & 6 Study Guide

These flashcards cover key terms and concepts from Chapters 5 & 6 of the accounting study guide, focusing on interest, accounts receivable, bad debts, inventory costing methods, and related financial principles.

Interest Revenue

Income earned from lending money, recognized through debiting Interest Receivable and crediting Interest Revenue.

Notes Receivable

An asset account that represents money owed to a lender from borrowers for loans provided.

Bad Debt Expense

The estimated amount of accounts receivable that may not be collected, recognized through an adjusting entry.

Allowance for Doubtful Accounts

A contra-asset account that forecasts uncollectible accounts, reducing the reported Accounts Receivable.

Matching Principle

An accounting principle that requires expenses to be recorded in the same period as the revenues they help generate.

Cost of Goods Sold Expense

An expense recognized for the cost of inventory sold during a reporting period.

Net Realizable Value

The estimated selling price of an asset in the ordinary course of business less any costs to complete and sell it.

Inventory

Goods purchased by a company for resale, recorded as an asset until sold.

FIFO (First-in-First-out)

An inventory cost flow method where the oldest inventory items are sold first.

LIFO (Last-in-First-out)

An inventory cost flow method where the newest inventory items are sold first.

Weighted Average

An inventory cost flow method that averages the costs of all goods available for sale during the accounting period.

Sales Revenue

Income earned from sales of goods, including adjustments for returns and allowances.

Interest Payable

A liability account that represents the amount of interest owed to lenders at the end of a reporting period.