Accounting for Receivables Chapter 9

Flashcards covering key terms and concepts related to accounting for receivables based on Chapter 9 of the Fundamental Accounting Principles.

Accounts Receivable

An amount due from another party, requiring separate tracking for each customer regarding purchases, payments, and remaining balances.

Note Receivable

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

Direct Write-Off Method

An accounting method where bad debts are written off as they are determined to be uncollectible.

Allowance Method

An accounting method that records estimated bad debts expense in the same period as related sales, showing accounts receivable at the estimated collectible amount.

Bad Debts

Amounts that are expected to not be paid by customers.

Accounts Receivable Turnover

A ratio that measures how efficiently a company manages its accounts receivable, calculated by dividing net credit sales by average accounts receivable.

Percentage of Sales Method

A method to estimate bad debts expense based on a fixed percentage of credit sales.

Aging of Accounts Receivable

An analysis method that classifies receivables based on how long they have been outstanding, estimating bad debts based on this classification.

Maturity Date

The date on which a note's principal and interest must be repaid.

Recovering Bad Debts

The process of receiving payment from a customer after a debt has been written off.