Chapter 7: Accounting for Receivables

Flashcards to aid in understanding key concepts related to accounting for receivables, as outlined in Chapter 7.

Accounts Receivable

An amount due from another party, tracked separately for each customer.

Note Receivable

A written promise to pay a specified amount of money, usually with interest, on demand or at a stated future date.

Maturity Date

The date on which the principal and interest of a note must be repaid.

Direct Write-Off Method

An accounting method where bad debts are written off directly to expense when they are deemed uncollectible.

Allowance Method

An accounting method that estimates bad debts in the period when sales occur and reports accounts receivable at the estimated collectible amount.

Bad Debts

Amounts that customers are unable to pay, often classified as uncollectible.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects receivables and extends credit.

Recovering a Bad Debt

The action taken when a previously written-off account is paid off by the customer.

Estimating Bad Debts Expense

The process of predicting the amount of accounts receivable that will be uncollectible.

Selling Receivables

The process of converting receivables into cash before their due date through sale.

Pledging Receivables

Using accounts receivable as collateral for a loan.