Ch_6_Acc

Cash and Receivables

Financial assets that represent liquid currency and claims to receive cash or other financial assets.

Cash Equivalents

Short-term, highly liquid assets that can be converted into known amounts of cash with little risk of price fluctuations.

Accounts Receivable

Amounts owed by customers for goods or services sold on credit; these are typically collected within one year.

Notes Receivable

Written promises to pay a specific sum of money on demand or on a defined future date, more formal than accounts receivable.

Derecognition of Receivables

The removal of a recognized receivable from the balance sheet, typically occurring after payment.

Internal Control of Cash

Policies and procedures put in place by management to protect cash assets and ensure accurate financial reporting.

Net Realizable Value (NRV)

The expected amount to be received from an asset, net of any allowances for uncollectible accounts.

Allowance for Doubtful Accounts (AFDA)

A contra account used to estimate and report the amount of accounts receivable that is expected to be uncollectible.

Factoring

The sale of accounts receivable to a financial institution (factor) to speed up cash collection.

Securitization

The process of bundling and selling receivables to raise funds, typically involving a special purpose entity (SPE).

Trade Receivables

Amounts owed to a company by its customers for goods and services provided on credit.

Cash Discounts

Price reductions offered to customers to encourage faster payment of invoices.

Sales Returns and Allowances

Reductions in sales revenue resulting from goods returned by customers or price reductions for damaged goods.

Percentage of Accounts Receivable Method

A method to estimate uncollectible accounts by applying a percentage to total accounts receivable.

Aging Schedule

A report that categorizes accounts receivable based on the length of time they have been outstanding.

Quick Ratio

A liquidity ratio that measures a company's ability to meet short-term obligations with its most liquid assets.

Days’ Sales Uncollected

A measure of how many days on average it takes a company to collect payment for credit sales.

Market Rate of Interest

The prevailing interest rate in the market for a similar debt instrument, used to determine present value.

Long-term Assets

Assets that are expected to provide economic benefits for more than one year.

Short-term Assets

Assets that are expected to be converted into cash or consumed within one year.

Capitalization of Transaction Costs

Recording transaction costs associated with financial assets as part of the asset's value.