Reporting and Analyzing Receivables

These flashcards cover key terms and concepts related to the reporting and analysis of receivables, which are essential for understanding the financial aspects of accounts receivable management.

Accounts Receivable

Amounts due to a business from its customers, expected to be collected in cash.

Subsidary Ledger

A group of accounts that share a common characteristic, providing details to support the total balance in the general ledger.

Collection Policies

Guidelines that dictate the timeframe for payment of accounts receivable, often 30, 45, or 60 days.

Sales Discount

A reduction in the amount owed by a customer if payment is made within a specified period.

Uncollectible Accounts

Accounts receivable that are determined to be uncollectible and result in a loss recorded as Bad Debts Expense.

Direct Write-Off Method

A method of writing off accounts when they are determined to be uncollectible, not following GAAP.

Allowance Method

A method that estimates and sets up a reserve for accounts that may become uncollectible to match expenses with revenues.

Allowance for Doubtful Accounts (AFDA)

An account that holds an estimated amount of uncollectible accounts receivable.

Accounts Receivable Turnover Ratio

A measure indicating how many times a company collects its average accounts receivable in a period.

Average Collection Period

The average number of days that accounts receivable are outstanding before they are collected.

Notes Receivable

A written promise to repay a specified amount, often including interest and typically used for high-risk customers.

Interest Calculation Formula

Interest = Face Value of Note x Annual Interest Rate x Time in terms of one year.

Bad Debts Expense

An expense account that records losses from uncollectible accounts receivable.

Credit Sales

Net sales that are made on account, where payment is expected at a later date.

Net Realizable Value

The amount expected to be received from accounts receivable after deducting the allowance for doubtful accounts.