Chapter 6
Order by
21 terms
Terms | Definitions |
|---|---|
 receivables | all money claims against other entities, including people, business firms, and other organizations |
| accounts receivable | normally expected to be collected within a relativity short period, such as 30 or 60 days |
| note receivable | promissory note, a written promise to pay a sum of money on demand or at a definite time |
| maturity value | the amount that is due at the maturity or due date of a note receivable |
| bad debt expense | the operating expense recorded from uncollectible receivables, uncollectible accounts expense or doubtful accounts expense |
| direct write-off method | records bad debt expense only when an account is judged to be worthless |
| allowance method | records bad debt expense by estimating uncollectible accounts at the end of the accounting period and recording an adjustment |
| Allowance for Doubtful Accounts | a contra asset account |
| net realizable value | the adjustment reduces the value of the receivables to the amount of cash expected to be realized in the future |
| aging the receivables | basing the estimate of uncollectible accounts on how long specific accounts have been outstanding |
| merchandise inventory | the merchandise on hand at the end of the period that is a current asset |
| materials inventory | the cost of raw materials used in manufacturing a product |
| work in process inventory | the costs for partially completed product |
| finished goods inventory | the costs of direct materials, direct labor, and factory overhead for completed production |
| cost of goods sold | when the finished goods are sold, the costs are transferred to the cost of merchandise sold on the income statement |
| first-in, first-out (fifo) method | the ending inventory is made up of the most recent costs |
| last-in, first-out (lifo) method | the ending inventory is made up of the earliest costs |
| average cost method | the cost of the units in inventory is an average of the purchase costs |
| lifo conformity rule | if a firm elects to use lifo inventory valuation for tax purposes, then the business must also use lifo for external financial reporting |
| lifo reserve | the financial statements will include a note that states the estimated difference between the lifo inventory and the inventory if fifo had been used |
| lower-of-cost-or-market (LCM) method | used to value the inventory if the cost of replacing an item in inventory is lower than the original purchase cost |
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