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ACCT 2101: EXAM 2
Allowance for doubtful accounts |
A contra-asset account containing the estimated uncollectible accounts receivable
|
Sales discount |
A discount offered to encourage prompt payment of credit sales to customers |
Bad debt expense |
The expense associated with estimated future uncollectible accounts receivable
|
Percentage of credit sales method |
Estimates bad debt expense based on the historical percentage of credit sales that resulted in bad debts
|
Aging of accounts receivable method |
Estimates uncollectible accounts receivable based on the age (length of time unpaid) of each receivable |
Cash equivalents |
Short term investments with original maturities of three months or less that are readily convertible to cash |
Credit Card Discount |
The fee charged by the credit card company for its services
|
Accounts receivable turnover |
Credit sales/Average net account receivable |
Net sales |
Sales-credit card allowances-returns-sales discount |
Average net account receivable |
(Beginning accounts receivable+ending accounts receivable)/2 OOOOORRRRRRR (Accounts Receivable-Allowance for doubtful accounts) <--find the A/R for a year and use that as "beginning" and then find the next year's with the stuff in parentheses and find the ending |
Average collection period |
365/accounts receivable turnover
|
Sales returns and allowances are accounted for |
In a separate contra-revenue account
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Deferred (unearned) revenue |
previously recorded liabilities that need to be adjusted to reflect amount of revenue earned (payment before service delivery)
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Deferred expenses |
Previously acquired assets that need to be adjusted to reflect expense incurred in using asset to generate revenue |
Accrued Revenues |
Previously unrecorded revenues that need to be adjusted to reflect amount earned and related receivable account (revenues earned/good provided before customer pays) revenues earned --> cash receives in future |
Post closing trial balance |
Last step of accounting cycle to assure debits=credits and all temporary accounts are closed (revenues, expenses, gains, losses)
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Closing entry |
Transfers balances in the temporary accounts to retained earnings and establishes 0 balances in temporary accounts
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Net book value |
Difference b/t acquisition cost and accumulated depreciation |
Contra-account |
Account that reduces primary account
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Permanent (real) accounts |
Balance sheet accounts, carry ending balances into the next accounting period
|
Temporary (nominal) accounts |
Income statement accounts. Closed to retained earnings at the end of the period.
|
Trail balance |
List of all accounts with their balances to check that debits=credits |
Adjusting entries |
Entries at the end of accounting period to measure all revenues and expenses |
Accounting cycle |
Process to analyze and record transactions, adjust records at end of the period, prepare financial statements, and prepare for next cycle
|
Bank statement |
Monthly report showing deposits, checks cleared, debits, credits and the bank balance |
Cash |
Money or instrument that banks accept for deposit and immediately credit account |
Non-trade receivables |
Amounts owed to business for other than business transactions |
Trade receivables |
Amounts owed to business for credit sales of goods/services |
Notes receivable |
Written promises to pay in a specified term |
Bank reconciliation |
Verifies accuracy of bank statement and cash accounts |
Percent of credit sales method |
Bases bad debt expense on historical percent of credit sales ending in bad debts (computes bad debt expense) |
Aging of accounts receivable method |
Estimates uncollectible based on age of A/R (allowance for doubtful accounts)
|
Allowance for doubtful accounts |
Contra-asset account containing estimated uncollectible accounts receivable |
Allowance method |
Bases bad debt expense on an estimate of uncollectible accounts |