- accounts receivable
- outstanding customer debt on a credit sale, typically receivable within a short time period
- accounts receivable turnover ratio
- how many times accounts receivable is collected during an operating period and converted to cash
- accrual accounting
- records transactions related to revenue earnings as they occur, not when cash is collected
- allowance for doubtful accounts
- contra asset account that is specifically contrary to accounts receivable; it is used to estimate bad debt when the specific customer is unknown
- allowance method
- estimates bad debt during a period based on certain computational approaches, and it matches this to sales
- bad debts
- uncollectible amounts from customer accounts
- balance sheet aging of receivables method
- allowance method approach that estimates bad debt expenses based on the balance in accounts receivable, but it also considers the uncollectible time period for each account
- balance sheet method
- (also, percentage of accounts receivable method) allowance method approach that estimates bad debt expenses based on the balance in accounts receivable
- completed contract method
- delays reporting of both revenues and expenses until the entire contract is complete
- contra account
- account paired with another account type that has an opposite normal balance to the paired account; reduces or increases the balance in the paired account at the end of a period
- direct write-off method
- delays recognition of bad debt until the specific customer accounts receivable is identified
- earnings management
- works within GAAP constraints to improve stakeholders’ views of the company’s financial position
- earnings manipulation
- ignores GAAP rules to alter earnings significantly to improve stakeholder’s views of the company’s financial position
- income statement method
- allowance method approach that estimates bad debt expenses based on the assumption that at the end of the period, a certain percentage of sales during the period will not be collected
- installment sale
- periodic installment payments from buyers
- interest
- monetary incentive to the lender, which justifies loan risk; interest is paid to the lender by the borrower
- interest rate
- part of a loan charged to the borrower, expressed as an annual percentage of the outstanding loan amount
- issue date
- point at which the security agreement is initially established
- matching principle
- (also, expense recognition principle) records expenses related to revenue generation in the period in which they are incurred
- maturity date
- date a bond or note becomes due and payable
- net realizable value
- amount of an account balance that is expected to be collected; for example, if a company has a balance of $10,000 in accounts receivable and a $300 balance in the allowance for doubtful accounts, the net realizable value is $9,700
- note receivable
- formal legal contract between the buyer and the company, which requires a specific payment amount at a predetermined future date, usually includes interest, and is payable beyond a company’s operating cycle
- number of days’ sales in receivables
- expected days it will take to convert accounts receivable into cash
- percentage of completion method
- percentage of work completed for the period divided by the total revenues from the contract
- principal
- initial borrowed amount of a loan, not including interest; also, face value or maturity value of a bond (the amount to be paid at maturity)
- receivable
- outstanding amount owed from a customer
- revenue recognition principle
- principle stating that company must recognize revenue in the period in which it is earned; it is not considered earned until a product or service has been provided