Intermediate Accounting - Chapter 7

Oral promises of the purchaser to pay for goods and services sold.

Measures the number of times, on average, a company collects receivables during the period.

Identifies which accounts require special attention by indicating the extent to which certain accounts are past due.

Involves estimating uncollectible accounts at the end of each period.

Occur when a company writes a check for more than the amount in its cash account.

A schedule explaining any differences between the bank's and the company's records of cash.

The most liquid of assets, is the standard medium of exchange and the basis for measuring and accounting for all other items.

Offered to induce prompt payment. Generally presented in terms such as 2/10, n/30 (2 percent if paid within 10 days, gross amount due in 30 days).

Short-term, highly liquid investments that are both a) readily convertible to known amounts of cash, and b) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Minimum cash balances in checking or savings accounts that are required by lending institutions.

When a company determines a particular account to be uncollectible, it charges the loss to Bad Debt Expense.

Traditionally associated with the textile, apparel, footwear, furniture, and home furnishing industries. Factors are finance companies or banks that buy receivables from businesses for a fee and then collect the remittances directly from the customers.

Receivables are recorded at fair value, with unrealized holding gains or losses reported as part of net income.

Seller has a continuing involvement with the receivable.

1. Petty cash custodian is designated.

2. Custodian obtains receipts from each individual that is paid cash.

3. When cash supply is low, custodian presents to controller with receipts and other supporting evidence and requests replenishment.

4. Petty cash fund may be lowered.

Interest rate that is approximated.

The net amount the company expects to receive in cash.

Arise from a variety of transactions:

1. Advances to officers and employees.

2. Advances to subsidiaries.

3. Deposits paid to cover potential damages or losses.

4. Deposits paid as a guarantee of performance or payment.

5. Dividends and interest receivable.

Written promises to pay a certain sum of money on a specified future date.

Checks that are not honored by the bank in which it was written from because of insufficient funds in the drawer's check, causing there to be an overdraft in the account.

A written promise to pay a certain sum of money at a specific future date.

Financial assets. Claims held against customers and others for money, goods, or services.

Restricted cash, in contrast to cash freely available for a company to spend or invest, refers to money that is held for a specific purpose and therefore not available to the company for immediate or general business use.

Offered to induce prompt payment. See: Cash Discounts.

A discount on the retail price of something allowed or agreed between traders or to a retailer by a wholesaler.

Amounts billed by a business to its customers when it delivers goods or services to them in the ordinary course of business. These billings are typically documented on formal invoices, which are summarized in an accounts receivable aging report.

The amount of consideration that a company expects to receive from a customer in exchange for transferring goods or services.

The net change in the fair value of the receivable from one period to another, exclusive of interest revenue.

The seller of the receivable assumes no responsibility for any credit losses associated with the transferred receivables.

The seller guarantees payment to the purchaser in the event the debtor fails to pay.

A note or bond with no stated interest rate on its face.