ACCT 201 LS Ch. 5

Increase expenses Reduce assets

The effect of uncollectible accounts is to:

Sales discount

A cash discount representing a reduction in the amount to be paid by a credit customer if the customers pay within a specified period of time

Receivable

A claim to receive cash in the future

Trade discount

A percentage reduction from list price

Change prices without publishing a new catalog Disguise real prices from competitors Give quantity discounts to customers

A trade discount is a eduction from the list price, wh oh is used to:

Not recognized directly when recording a sale

A trade discount is...

Current asset

An account receivable is normally classified as a...

Income statement Operating expense

Bad debt expense is reported on the _____ and classified as an ______

Uncollectible accounts

Customers' accountants that we no longer consider collectible are ___

Note receivable

Formal credit arrangement between borrower and lender

Service revenue

Glasser Corp. provided $20,000 of services on account. The amount that should be credited is...

Net realizable

Gross accounts receivable less allowance for doubtful accounts is the ____ value of accounts receivable

Expenses are overstated Revenues are overstated

If sales returns are treated as expenses, what are the effects on the financial statements?

Accounts receivable

Informal credit agreement with trade customers

Sales return

When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a ___

Net revenues

Refer to a company's total revenues less any amounts for discounts, returns, and allowances

Accounts receivable

Represent the amount of cash owed to a company by its customer for the sale of products or services on account

Bad debt expense

Represents the cost of the estimated future bad debts

Credit sales Sales on account

Sales to customer in which the customers lay within 30 to 60 days are referred to as:

Sales allowance

The customer does not return the product or service, but the seller reduced the customer's balance owed to provide at least a partial refund

Net accounts receivable

The difference between total accounts receivable and the allowance for uncollectible accounts

Matching principle

The direct write-off method is normal not permitted for U.S. GAAP reporting because it violates the _____

Allowance for uncollectible accounts

The first step in using a balance sheet approach to estimate bad debts is to calculate the desired ending balance in which account?

Credit sales

Transfer products and service to a customer today while bearing the risk of collecting payment from the customer in the future

Record the collection on the account receivable Reinstate the account receivable

Two entries are required when a previously written off account is paid. These two entries include:

Contra revenue account

We record sales discounts in a ____