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

What is the major problem associated with selling goods or services on credit?

The risk of uncollectible accounts (bad debts)

Increased cash flow from immediate payments

Higher inventory turnover

Reduced need for accounts receivable management

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Verified step by step guidance

Understand the concept of selling goods or services on credit: This involves allowing customers to purchase now and pay later, creating accounts receivable for the business.

Identify the major problem associated with credit sales: The risk of uncollectible accounts (bad debts), which occurs when customers fail to pay their outstanding balances.

Explain why bad debts are a concern: Uncollectible accounts reduce the company's revenue and profitability, as the expected cash inflow from credit sales is not realized.

Discuss the impact on financial statements: Bad debts must be accounted for, typically through an allowance for doubtful accounts, which affects both the income statement and balance sheet.

Highlight the importance of accounts receivable management: Effective management practices, such as credit checks and collection efforts, can mitigate the risk of bad debts and ensure healthier cash flow.