Accounts Receivable and Bad Debt Accounting: Key Concepts and Methods

Interest is usually associated with

notes receivable

A seller may encourage early payment by

offering a discount for early payment

Companies generally expect to collect ____________ within 30 to 60 days

accounts receivable

Notes or accounts receivables that result from sales transactions are often called

trade receivables

The term "receivables" refers to

amounts due from individuals or companies

Allowance for Doubtful Accounts is

a contra asset account

The direct write-off method

records only actual losses from uncollectible accounts

Sales resulting from the use of Visa and MasterCard credit cards are considered

cash sales

The net amount expected to be received in cash from receivables is termed the

cash realizable value

The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the

percentage of receivables basis

____________ is considered a necessary risk of doing business on a credit basis

Bad debt expense

The direct write-off method

records actual losses from specific customer uncollectibles

Two methods of accounting for uncollectible accounts are the

direct write-off method and the allowance method

The allowance method of accounting for uncollectible accounts is required if

bad debts are significant in amount

Allowance for Doubtful Accounts on the balance sheet

is offset against accounts receivable

The percentage-of-receivables basis for estimating uncollectible accounts emphasizes

cash realizable value

The direct write-off method of accounting for bad debts

does not require estimates of bad debt losses

A promissory note

may be used to settle an accounts receivable

The two key parties to a promissory note are the

maker and the payee

When a note receivable is dishonored

Accounts Receivable is debited if eventual collection is expected