Term
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Definition
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Term
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Definition
| revenues are to be recorded when they are earned |
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Term
| two benefits of sales discounts |
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Definition
1. prompt payments reduces need for loans
2. decrease the chance that customer will run out of money as discount credits are paid first typically |
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Term
| net sales = revenues - returns and allowances |
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Definition
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Term
| gross profit/gross margin equation |
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Definition
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Term
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Definition
| created when a sale made on credit occurs |
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Term
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Definition
| occurs when sale is made not consisting of the sale of normal merchandise |
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Term
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Definition
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Term
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Definition
estimate of bad debt expense
1.make end-of-period adjustment
2. write off specific amunts |
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Term
| two accounts used for bad debts |
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Definition
credit allowance for doubtful accounts(asset)
debit bad debt expense (SE) |
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Term
| how to record known bad debt |
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Definition
debit allowace for doubtful
credit accts rec |
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Term
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Definition
| accounts receivable-allowance for abd |
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Term
| precentage of credit sales method |
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Definition
| estiamte based off of historical average |
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Term
| aging of accounts receivable method |
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Definition
| different percentages tied to the age of account receivable |
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Term
| receivables turnover ratio |
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Definition
| net sales/average net trade accounts receievable (average net trade=BB+EB/2) |
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Term
| average collection period |
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Definition
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Term
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Definition
| short term investments with original maturities of three months or less that are readily convertable into cash, value unlikely to change |
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Term
| 2 effective internal controls of cash |
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Definition
1. seperation of duties
2. prescribed policies and procedures |
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Term
| 6 most common reasons for for differences between ending bank balance and ending book balance |
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Definition
1. outstanding checks
2. deposits in transit
3. bank service charges
4. NSF checks
5. INterest
6. Erros |
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Term
| 4 steps to prepare bank reconciliation |
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Definition
identify outstanding checks
identify deposits in transit
record bank charges and credits
determine impact of errors |
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