Chapter 5-Receivables and Sales

A claim to receive cash in the future is a

receivable

What is a note receivable?

A formal credit arrangement between borrower and lender

What are likely disadvantages of extending credit to customers?

Delays in collecting accounts Accounts that are uncollectible

An account receivable is normally classified as a

current asset

The formula for calculating interest on a note is

face amount x annual rate x fraction of the annual period.

What is an Account Receivable?

An informal credit agreement with trade customers

Which are the following are classified as receivables?

Loans by a company to other entities Interest due from loans to customers

Total revenues less discounts, returns, and allowances are referred to as

Net revenues

A trade discount is

a percentage reduction from list price

Sales to customers in which the customers pay within 30 to 60 days are referred to as

credit sales and sales on account

A signed agreement between a lender and a borrower from loaning money to other entities, extending credit to customers, or form selling assets or service to others is called a

note receivable

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 is also referred to as a

sales discount