Match the following statements to the appropriate terms. A written promise to pay a specified amount on demand or at a definite time. Sales that involve the customer, the retailer, and the credit card issuer. A measure of the liquidity of receivables. Notes and accounts receivable that result from sales transactions. A note which is not paid in full at maturity. Analysis of customer account balances by the length of time they have been unpaid. Emphasizes expected cash realizable value of accounts receivable. Bad debt losses are not estimated and no allowance account is used. The net amount expected to be received in cash.
The Correct Answer and Explanation is :
Here are the terms that match the statements, along with explanations:
- A written promise to pay a specified amount on demand or at a definite time: Note Receivable
A note receivable is a written agreement where a borrower promises to pay a specific amount of money either on demand or by a certain due date. It typically involves a formal loan or a promissory note. - Sales that involve the customer, the retailer, and the credit card issuer: Credit Card Sales
Credit card sales are transactions where the customer buys goods or services using a credit card issued by a financial institution. The retailer receives payment from the credit card issuer, while the customer is expected to repay the credit card company. - A measure of the liquidity of receivables: Receivables Turnover Ratio
The receivables turnover ratio measures how efficiently a company collects its receivables or the speed at which its receivables are converted into cash. A higher ratio indicates that receivables are being collected more quickly, which suggests better liquidity. - Notes and accounts receivable that result from sales transactions: Trade Receivables
Trade receivables refer to amounts owed by customers arising from sales of goods or services. These are typically classified as accounts receivable or notes receivable, depending on whether they are informal or formal agreements. - A note which is not paid in full at maturity: Dishonored Note
A dishonored note occurs when the borrower fails to repay the full amount due on a note receivable by the agreed-upon maturity date. It is considered a default and is treated differently from performing notes. - Analysis of customer account balances by the length of time they have been unpaid: Aging of Receivables
The aging of receivables involves categorizing accounts receivable based on how long they have been outstanding. It helps in evaluating the collectibility of receivables and determining the need for allowances for doubtful accounts. - Emphasizes expected cash realizable value of accounts receivable: Allowance Method
The allowance method focuses on estimating and adjusting for bad debts by creating an allowance for doubtful accounts. This ensures that the reported amount of accounts receivable reflects the amount expected to be collected. - Bad debt losses are not estimated and no allowance account is used: Direct Write-off Method
Under the direct write-off method, bad debt losses are recorded only when a specific receivable is determined to be uncollectible. This method does not involve estimating bad debts in advance and does not use an allowance for doubtful accounts. - The net amount expected to be received in cash: Cash Realizable Value
The cash realizable value is the net amount of receivables that a company expects to collect in cash. This is calculated by adjusting the accounts receivable for any estimated uncollectible amounts, such as through the allowance for doubtful accounts.