acc note 7-8 - Chapter 7 Accounts receivable: short-term...

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Chapter 7 Accounts receivable: short-term finanicial assets that arise from sales on creadit at the whloesale or retail level. Accounts receivable aging method: a method of estimating uncollectible account based on the assumption that a predictable proportion of each dollar of account receivable outstanding will not be collected Aging of account receivable: the process of listing each customer's receivable account according to due date of the account. Allowence for uncollectible accounts : A contra-asset account that reduces accounts receivable to the amountexpecteed to be collected in cash. Also called allowence for doubtful accounts and allowance for bad debts Allowance method Amethod of accounting for uncolectible account by expensing estimated uncolectible accountis in period in which the related sales take place Bank reconciliation : the process of accounting for the diffrernce between the balance appearing on a company's bank statment and the balance in its cash acounts Cash : coins and currency on hand,checks and money orders from customers and deposits in checking and saving Cash equivalents: short-tern investment that will revert to cash in 90 days or less from the time they are purchase Compensating balance: A minimum amount that a bank require a company to keep in its bank acount as part of a creadit granting arrangment Contingent liability: A potential liability that can develop into real liability if a particular event occurs. Direct charge-off method: A method of accounting for uncollectible accounts accounts be directly debiting an expense account when bad debts are discovered; it violates the matching rule but is require for computing fedral income tax. Discounting: A methos of selling notes rexeivable to a bank in which the bank derives its profits by deducting the interest from
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acc note 7-8 - Chapter 7 Accounts receivable: short-term...

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