Dream princess
Age: 124
Total Posts: 105
Points: 0
Location:
United States, United States
Short-Term Financial Assets
A
Accounts receivable aging method A method of estimating uncollectible accounts based on the assumption that a predictable proportion of each dollar of accounts receivable outstanding will not be collected.
Aging of accounts receivable The process of listing each customer’s receivable account according to the due date of the account.
Allowance method A method of accounting for uncollectible accounts by expensing estimated uncollectible accounts in the period in which the related sales take place.
Allowance for Uncollectible Accounts A contra-asset account that reduces accounts receivable to the amount expected to be collected in cash. Also called Allowance for Doubtful Accounts and Allowance for Bad Debts.
Available-for-sale securities Debt and equity securities that do not meet the criteria for either held-to-maturity or trading securities.
Average days’ sales uncollected A ratio that shows on average how long it takes to collect accounts receivable; 365 days divided by receivable turnover.
B
Bank reconciliation The process of accounting for the difference between the balance appearing on the bank statement and the balance of the Cash account in the company’s records.
C
Cash "Coins and currency on hand, checks and money orders from customers, and deposits in bank checking and savings accounts."
Cash equivalents Short-term investments that will revert to cash in 90 days or less from the time they are purchased.
Compensating balance A minimum amount that a bank requires a company to keep in its bank account as part of a credit-granting arrangement.
Contingent liability A potential liability that can develop into a real liability if a particular subsequent event occurs.
D
Direct charge-off method A method of accounting for uncollectible accounts by directly debiting an expense account when bad debts are discovered instead of using the allowance method; this method violates the matching rule but is required for federal income tax computations.
Discounting A method of selling notes receivable in which the bank deducts the interest from the maturity value of the note to determine the proceeds.
Dishonored note A promissory note that the maker cannot or will not pay at the maturity date.
Duration of note The length of time in days between a promissory note’s issue date and its maturity date.
E
Electronic funds transfer (EFT) The transfer of funds from one bank to another through electronic communication.
F
Factor An entity that buys accounts receivable.
Factoring The selling or transferring of accounts receivable.
H
Held-to-maturity securities Debt securities that management intends to hold to their maturity or payment date and whose cash value is not needed until that date.
I
Imprest system A system for controlling small cash disbursements by establishing a fund at a fixed amount and periodically reimbursing the fund by the amount necessary to restore its original cash balance.
Installment accounts receivable Accounts receivable that are payable in a series of time payments.
Interest "The cost of borrowing money or the return for lending money, depending on whether one is the borrower or the lender."
M
Marketable securities Short-term investments intended to be held only until needed to pay current obligations. Also called short-term investments.
Maturity date The date on which a promissory note must be paid.
Maturity value The total proceeds of a promissory note—principal plus interest—at the maturity date.
N
Notes payable Collective term for promissory notes owed by the entity (maker) who promises payment to other entities.
Notes receivable Collective term for promissory notes held by the entity to whom payment is promised (payee).
P
Percentage of net sales method A method of estimating uncollectible accounts based on the assumption that a predictable proportion of each dollar of sales will not be collected.
Promissory note An unconditional promise to pay a definite sum of money on demand or at a future date.
Q
Quick ratio A ratio for measuring the adequacy of short-term financial assets; short-term financial assets divided by current liabilities.
R
Receivable turnover A ratio for measuring the average number of times receivables were turned into cash during an accounting period; net sales divided by average net accounts receivable.
S
Securitization The grouping of receivables into batches for sale at a discount to companies and investors.
Short-term financial assets "Assets that arise from cash transactions, the investment of cash, and the extension of credit."
Short-term investments Temporary investments of excess cash that are intended to be held only until they are needed to pay current obligations. Also called marketable securities.
T
Trade credit Credit granted to customers by wholesalers or retailers.
Trading securities Debt and equity securities bought and held principally for the purpose of being sold in the near term.
U
Uncollectible accounts Accounts receivable owed by customers who cannot or will not pay. Also called bad debts.
