Financial Accounting - Receivables and Revenues

This set of flashcards covers key vocabulary and concepts related to accounts receivable and revenue recognition in financial accounting.

Accounts Receivable

Amounts owed to a company by its customers from the sale of goods or services on account.

Credit Sales

Sales where a company provides goods or services to customers not for cash, but on account.

Net Revenues

Total revenues less any amounts for returns, allowances, and discounts.

Trade Discounts

Reductions in list price offered by sellers to incentivize larger purchases.

Sales Returns

Goods that customers return to the seller, leading to a reduction in accounts receivable.

Sales Allowances

Reductions in the amount owed by a customer when they are dissatisfied with a product or service.

Contra Revenue Accounts

Accounts that reduce total revenues, such as sales returns and sales allowances.

Allowance Method

An accounting method that estimates uncollectible accounts and reports this estimate as a contra asset.

Direct Write-Off Method

An accounting method where bad debts are written off only at the time they become uncollectible.

Notes Receivable

Formal credit arrangements evidenced by written debt instruments.

Receivables Turnover Ratio

Number of times during a year the average accounts receivable balance is collected.

Average Collection Period

The number of days the average accounts receivable balance is outstanding.

Percentage-of-Credit-Sales Method

A method for estimating uncollectible accounts based on the percentage of credit sales.

Allowance for Uncollectible Accounts

A contra asset account that represents the amount of accounts receivable not expected to be collected.