Accounting Final

What are Receivables?

Receivables are amounts owed to a company by customers or other entities, including account receivables (credit sales) and notes receivables (formal written promises to pay).

What is the Direct Write-off Method?

A method that directly writes off uncollectible accounts as an expense when deemed uncollectible, not generally accepted under GAAP for financial reporting.

What is the Allowance Method?

A method that estimates uncollectible accounts in advance, creating an allowance for bad debts as a contra-asset account, required by GAAP.

What is the purpose of an Accounts Receivable Aging Schedule?

It classifies receivables based on how long they have been outstanding to estimate bad debts.

What is the sale of receivables to a factor?

The process of selling receivables at a discount to a third party (factor) for immediate cash.

How do you journalize the initial note for Notes Receivable?

Debit Notes Receivable and Credit Sales Revenue for the note amount.

How to calculate interest on Notes Receivable?

Interest = Principal × Rate × Time.

How do you journalize depreciation using the Straight-Line method?

Annual Depreciation = (Cost - Salvage Value) / Useful Life.

What is the formula to calculate gain or loss on the sale of an asset?

Gain/Loss = Selling Price - Book Value.

What are current liabilities?

Obligations that must be settled within one year, such as accounts payable and short-term loans.

What are convertible bonds?

Bonds that can be converted into a specified number of shares of stock.

What is common stock?

Stock that represents ownership in a company, entitled to dividends and voting rights.

What journal entry is made for cash dividends?

Debit Retained Earnings and Credit Cash.

What is the effect of a stock split?

Increases the number of shares outstanding without changing the total value of the stock.