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Match Each of the Following Terms with the Appropriate Definition

Question 176

Matching

Match each of the following terms with the appropriate definition:

Premises:

Responses:

Full disclosure principle

The accounting principle that requires the financial statements (including the notes) to report all relevant information about operations and financial condition.

Materiality constraint

A method of accounting for bad debts that records the loss from an uncollectible account receivable when it is determined to be uncollectible.

Accounts receivable turnover

A buyer of accounts receivable who charges the seller a fee and then receives cash from the receivables as they come due.

Installment accounts receivable

The amount that the signer of a note agrees to pay back when the note matures, not including interest.

Principal of a note

Amounts owed by customers from credit sales for which payment is required in periodic payments over an extended period of time.

Factor

A measure of both the quality and liquidity of accounts receivable. It indicates how often, on average, receivables are received and collected during the period.

Maker of a note

The accounting constraint that states that an amount can be ignored if its effect on the financial statements is not important to their users.

Dishonoring a note

A method of accounting for bad debts that matches the estimated loss from uncollectible accounts receivable against the sales they helped to produce.

Direct write-off

One who signs a note and promises to pay it at maturity.

Allowance method

Refers to a note maker’s inability or refusal to pay the note at maturity.