Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

A major concern for firms selling on credit is:

the calculation of inventory turnover

the need to pay dividends to shareholders

the risk of uncollectible accounts

the depreciation of fixed assets

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Verified step by step guidance

Understand the context: Firms selling on credit allow customers to purchase goods or services and pay later. This creates accounts receivable on the firm's balance sheet.

Identify the major concern: Selling on credit introduces the risk that some customers may fail to pay their debts, leading to uncollectible accounts. This is a key financial risk for firms.

Explain the concept of uncollectible accounts: Uncollectible accounts are amounts owed by customers that the firm determines will not be collected. These are typically written off as bad debt expenses in the income statement.

Discuss the impact: Uncollectible accounts reduce the firm's profitability and can affect cash flow, making it harder to meet obligations or invest in growth.

Highlight the importance of management: Firms often use credit policies, credit checks, and allowances for doubtful accounts to mitigate the risk of uncollectible accounts and ensure financial stability.