Chapter 5 - Receivables and Sales

This set of flashcards covers key vocabulary terms and definitions related to receivables and sales, as discussed in Chapter 5.

Accounts Receivable

Amounts owed to a company by its customers for products or services delivered on credit.

Trade Receivables

Amounts receivable from customers due to credit sales.

Nontrade Receivables

Receivables from parties other than customers, including tax refund claims and loans to employees.

Trade Discounts

Reductions in the listed price of a product or service.

Sales Discount

A reduction in the amount a credit customer has to pay if they settle their account within a specific time.

Contra Revenues

Revenue accounts that are offset against total revenues, such as sales discounts and sales returns.

Allowance for Uncollectible Accounts

A contra asset account used to estimate the portion of receivables that may not be collected.

Receivables Turnover Ratio

A financial ratio that measures how effectively a company is managing its receivables by comparing net credit sales to average accounts receivable.

Average Collection Period

The average number of days a company takes to collect payments from its customers.

Percentage of Receivables Method

A method of estimating future bad debts by applying a percentage to the outstanding receivables.

Direct Write-Off Method

A method of accounting for uncollectible accounts by writing off bad debts only when they are deemed uncollectible.

Bad Debt Expense

An expense account that reports the estimated uncollectible amounts included in accounts receivable.