Listed below are five terms followed by a list of

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Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. 1. Compensating balance Average number of days that accounts receivable are outstanding. __2__ 2. Average collection period The sale of accounts receivable to a financial institution. __5__ 3. Trade discounts Deducted from list price. _3___ 4. Discounting An example of a restriction on cash. _1___ 5. Factoring The sale of a note receivable to a lender. ___4_
114 . Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term. 1. Sales returns Bad debt expense is recorded when receivables are written off. __8__ 2. Pledging Reduces the amount paid by a credit customer if paid within a specified time. __3__ 3. Cash discount Grouping accounts receivable depending on the length of time outstanding. _10___ 4. Balance sheet approach An attempt to satisfy the matching principle for bad debts. __6__ 5. Compensating balance When merchandise is returned for credit. __1__ 6. Allowance method Bad debt expense determined by estimating net realizable value. __4__ 7. Income statement approach Bad debt expense a % of credit sales. __7__ 8. Direct write-off method An example of a restriction on cash. _5___ 9. Without recourse Using receivables as collateral for a loan. __2__ 10. Accounts receivable aging schedule Buyer assumes the risk of uncollectibility. __9__ 115 . Listed below are five terms followed by a list of phrases that describe or characterize each of the terms with respect to accounting under IFRS. Match each phrase with the correct term. 1. Impairment This accounting approach can be used for receivables if elected upon initial recognition. ____ 2. Available for sale Can be netted against positive cash balances on the balance sheet. ____ 3. Control Can be recovered to increase income if fair value increases. ____ 4. Risks and rewards Primary consideration for determining whether transfer of a receivable is a sale. ____ 5. Overdraft Secondary consideration for determining whether transfer of a receivable is a sale. ____
Chapter 07 Cash and Receivables Answer Key True / False Questions 1. Cash equivalents would include investments in marketable equity securities as long as management intends to sell the securities in the next three months.
AACSB: Reflective Thinking AICPA BB: Critical Thinking Blooms: Remember Difficulty: 1 Easy Learning Objective: 07-01 Define what is meant by internal control and describe some key elements of an internal control system for cash receipts and disbursements. Topic: Internal Control 2. From a financial accounting perspective, the main purposes of a system of internal control are to improve the accuracy and reliability of accounting information and to safeguard assets.

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