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Receivable
When a business sells goods or services to another party on account (credit)
Debtor
The party to a credit transaction who is obligated to pay later
Accounts Receivable
The right to receive cash in the future from customers for goods or services performed
Notes Receivable
A promise to pay a fixed amount of principal plus interest by a certain due date
Maturity Date
The date on which a note receivable is due
Bad Debts Expense
Arises from failure to collect from some customers who purchase on account
Direct Write-Off Method
A method of accounting for uncollectible receivables in which the company records bad debt expense when a customer’s account receivable is uncollectible
Used by small companies
Allowance Method
Records bad debts in the same period as the sales revenue
Based on the matching principle
Most companies use this method
Percent-of-Sales Method
A method that computes bad debts expense as a percentage of net credit sales
Income statement approach
Percent-of-Receivables Method
Computes bad debts expense as a percentage of accounts receivable
Aging-of-Receivables Method
A method that analyzes accounts receivable based on how long they are
Principal
The amount loaned by the payee and borrowed by the maker of the note
Interest
The revenue to the payee for loaning money
Interest Period
The period of time during which interest is computed
Interest Rate
The percentage rate of interest specified by the note
Maturity Value
The sum of the principal plus interest due at maturity
Acid-Test Ratio
Used to measure a company’s ability to pay its current liabilities
Accounts Receivable Turnover Ratio
Measures the number of times the company collects the average accounts receivable balance in a year
Days’ Sales in Receivables
Indicates how many days it takes to collect the average level of accounts receivable
Note 
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