Intermediate I – Ch. 6 Part 1: Receivables

These flashcards cover key terms and concepts related to receivables accounting as outlined in the Intermediate I course materials.

Receivables

Amounts owed to a company, arising from selling goods or services on credit.

Accounts Receivable

A type of trade receivable that reflects amounts customers owe to a business for goods and services.

Nontrade Receivables

Receivables that do not arise from the sale of goods or services, including advances, interest, and tax refunds.

Trade Discount

An arbitrary reduction in the sales price that is not recorded in financial accounting.

Cash Discounts

Reductions in the selling price offered to encourage prompt payment by customers.

Bad Debt Expense

An expense incurred when receivables are deemed uncollectible.

Direct Write-off Method

A method of accounting for bad debts where a specific receivable is written off directly as an expense when it becomes uncollectible.

Allowance Method

An accounting technique that estimates uncollectible receivables based on past experiences and sales.

Accounts Receivable Turnover

A measure of how efficiently a company collects on its accounts receivable; calculated as net sales divided by average accounts receivable.

Pledging

Using accounts receivable as collateral for a loan without designating specific receivables.

Factoring

Selling accounts receivable to a third party at a discount, allowing immediate cash but possibly at a loss.

Securitization

The process of pooling various types of receivables to create a financial instrument that can be sold to investors.

Imputed Interest

Interest that is assumed to exist in a transaction that does not explicitly state an interest rate.

Notes Receivable

Written promises for amounts to be received; can be either interest bearing or non-interest bearing.

Net Realizable Value

The estimated selling price of receivables less any costs to complete and sell.

Historical Cost

The amount at which an asset was originally purchased, recorded on the balance sheet.

Fair Value

The estimated worth of an asset based on current market conditions.

Impairment Loss

A reduction in the carrying amount of a receivable when its recoverable amount is less than its book value.