Chapter 14 Study Guide Accounting 2

Aging of Accounts Receivable
Analyzing accounts receivable according to when they are due

Allowance Method
Crediting the estimated value of uncollectible accounts to a contra account

Book Value
The difference between an asset’s account balance and its related contra account balance

Book Value of Accounts Receivable
The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts

Direct Write-Off Method
Recording uncollectible accounts expense only when an amount is actually known to be uncollectible

Dishonored Note
A note that is not paid when due

Interest Income
The interest earned on money loaned

Interest Rate
The percentage of the principal that is due for the use of the funds secured by a note.

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Maker of a Note
The person or business that signs a note, and thus promises to make full payment

Maturity Date
The date on which the principal of a note is due to be repaid

Maturity Value
The amount that is due on the maturity date of a note

Net Realizable Value
The amount of accounts receivable a business expects to collect

Note Payable
A promissory note signed by a business and given to a creditor

Note Receivable
A promissory note that a business accepts from a person or business

Payee
The person or business to whom the amount or a note is payable

Percent of Accounts Receivable Method
A method used to estimate uncollectible accounts receivable that uses an analysis of accounts receivable to estimate the amount that will be uncollectible.

Percent of Sales Method
A method used to estimate uncollectible accounts receivable that assumes a percent of credit sales will become uncollectible

Principal
The original amount of a note, sometimes referred to as the face amount

Promissory Note
A written and signed promise to pay a sum of money at a specific time

Time of a Note
The length of time from the signing date of a note to the maturity date

Uncollectible Accounts
Accounts receivable that cannot be collected

Writing Off an Account
Canceling the balance of a customer account because the customer does not pay

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