NAME

Question types


Start with


Question limit

of 25 available terms

Advertisement Upgrade to remove ads
Print test

5 Written questions

5 Matching questions

  1. open account
  2. percentage-of-credit-sales approach
  3. allowance method
  4. record control
  5. multinational corporation
  1. a The allowance method, under generally accepted accounting principles (GAAP) is the preferred method to account for uncollectibles and sales returns, both of which have a direct effect on the reported value of accounts receivable. The allowance method involves estimating the dollar amount of the uncollectibles or sales returns at the end of each accounting period and, based on that estimate, records an entry that reduces both net income and the balance in accounts receivable with a contra account called 'allowance for uncollectibles'.
  2. b Multinational corporations have their home in one country but operate and have subsidiaries operating within and under the laws of other countries.
  3. c The percentage-of-credit- sales approach is a method of estimating bad debts that multiplies a given percentage by the credit sales of a given accounting period. Percentage-of-credit-sales is a common method of estimating uncollectibles, used in conjunction with the allowance method, when accounting for accounts receivable.
  4. d The procedures designed to ensure that the cash account on the balance sheet reflects the actual amount of cash in the company's possession.
  5. e An open account is an informal credit trade agreement used in cases where frequent credit transactions are conducted and a running balance of the obligation or receivable is maintained. If payments are made regularly within reasonable time periods, interest charges are not usually assessed. Open account is normally used to describe the trade terms underlying accounts receivable and accounts payable.

5 Multiple choice questions

  1. Hedging is a strategy used by management to reduce the risk associated with fluctuations in the values of assets and liabilities.
  2. Operating cycle is the time it takes, in general, for a company to begin with cash, convert the cash to inventory (or a service), sell the inventory (or service), and receive cash payment.
  3. The process designed to safeguard cash from loss or theft.
  4. Escrow is the state of an item (e.g., cash) that has been put into the custody of a third party until certain conditions are fulfilled. Damage deposits on rental agreements, for example, are often held in escrow until the end of the rental period.
  5. Initially recognize the full sales price (gross) and later discount the gross.

5 True/False questions

  1. window dressingHedging is a strategy used by management to reduce the risk associated with fluctuations in the values of assets and liabilities.

          

  2. cash discountThe reduction in the per-unit price of an item if a certain quantity is purchased.

          

  3. working capitalCurrent assets/Current liabilities. The current ratio is often used to assess a company's current asset management and its solvency position. It is normally an important part of financial statement analysis.

          

  4. petty cashEscrow is the state of an item (e.g., cash) that has been put into the custody of a third party until certain conditions are fulfilled. Damage deposits on rental agreements, for example, are often held in escrow until the end of the rental period.

          

  5. aging scheduleOperating cycle is the time it takes, in general, for a company to begin with cash, convert the cash to inventory (or a service), sell the inventory (or service), and receive cash payment.

          

Create Set