accounts receivable
balances customers owe on account as a result of the sale of goods or services. They are normally unsecured and noninterest-bearing.
aging-of-receivables method
method for estimating bad debts expense utilizing a report that classifies customer balances by the length of time those accounts have been unpaid
allowance for doubtful accounts
contra account to accounts receivable that reports the accumulated amount of accounts receivable a company estimates it will not collect
allowance method
method for accounting for bad debts or uncollectible accounts that involves estimating those uncollectible accounts at the end of each reporting period
bad debt expense
amount of uncollectible accounts receivable that a company does not expect to collect and has written off to the income statement
contra asset account
account having the opposite normal balance of the related account
direct write-off method
method for accounting and reporting bad debts only when a particular customer account is proven to be uncollectible
face amount
amount of money (excluding interest) that the maker (or debtor) borrowed or the payee (or creditor) loaned in a note transaction
maker
party who makes the promise to pay in a promissory note
maturity date
date on which a maker (or debtor) must pay its note balance to the payee (or creditor)
maturity value
sum of both the principal and interest due on a note
net realizable value
as it relates to accounts receivable, the net amount a company expects to receive in cash from those receivables
notes receivable
written promises (typically evidenced by a formal instrument) to receive a specific amount of money (plus or with interest) at a designated future date or on demand
payee
party to whom the payment will be made in a promissory note
percentage-of-sales method
method for estimating bad debts under the allowance method that involves computing bad debt expense as a percent of sales on account
promissory note
written promise to pay a specified amount of money at some definitive date or on demand
secured
borrower (customer) provides the lender (company) a claim to a certain amount of its assets (often referred to as collateral) in the event of the borrower's default, or failure to pay the note
term
time period extending from the note's issuance date to the note's maturity date