"CLEP Financial Accounting," Vocabulary from Chapter 10

This list focuses on accounts receivable (A/R).

Here are links to all the chapters of the test prep book published by Research & Education Association: Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapter 10, Chapter 11, Chapter 12, Chapter 13, Chapter 14, Chapter 15, Chapter 16, Chapter 17, Chapter 18, Chapter 19, Chapter 20
25 words 34 learners

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Full list of words from this list:

words only definitions & notes
  1. incur
    make oneself subject to
  2. basis
    the most important or necessary part of something
  3. control
    verify by using a duplicate register for comparison
  4. subsidiary
    functioning in a supporting capacity
  5. current
    occurring in or belonging to the present time
  6. assets
    anything of material value owned by a person or company
  7. method
    a way of doing something, especially a systematic way
  8. debt
    money or goods or services owed by one person to another
  9. customer
    someone who pays for goods or services
  10. estimate
    judge to be probable
  11. allowance
    an amount added or deducted due to qualifying circumstances
  12. recognize
    perceive to be something or something you can identify
  13. collect
    call for and obtain payment of
  14. doubtful
    fraught with uncertainty
  15. percentage
    a proportion in relation to a whole
  16. adjustment
    amount added or deducted based on qualifying circumstances
  17. shortcoming
    a failing or deficiency
  18. remove
    take something away as by lifting, pushing, or taking off
  19. ignore
    refuse to acknowledge
  20. revenue
    the entire amount of income before any deductions are made
  21. potential
    expected to become or be
  22. violate
    fail to agree with; go against
    The direct write-off method shows the bad-debt expense when the business finally gives up trying to collect. Because the bad-debt expense shows up many periods after the revenue was recognized, this method violates the matching principle, and so is not GAAP.
  23. principle
    a rule or standard especially of good behavior
    The Matching Principle says that a company's income and the expenses associated with earning that income should be matched with each other and reported in the same period.
  24. formula
    a statement expressing some fundamental principle
    To estimate the allowance for uncollectible accounts:
    A/R x Est% = what allowance should be - what allowance is = adjustment
    To estimate uncollectible accounts expense:
    Sales x Est% = uncollectible accounts expense
  25. clue
    evidence that helps to solve a problem
    In a CLEP problem, if the business uses accounts receivable or any other "receivable," the business uses accrual accounting (the system in which income is recognized when earned and expenses are recognized when incurred, regardless of when actual payments are received or made).
Created on November 2, 2016 (updated December 14, 2016)

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