Chapter 7, Problem 7.27E

Concepts; terminology

• LO7–1 through LO7–8

Listed below are several terms and phrases associated with cash and receivables. Pair each item from List A (by letter) with the item from List B that is most appropriately associated with it.

List A	List B
________ 1. Internal controla	a. Restriction on cash
________ 2. Trade discount	b. Cash discount not taken is sales revenue
________ 3. Cash equivalents	c. Includes separation of duties
________ 4. Allowance for uncollectibles	d. Bad debt expense a % of credit sales
________ 5. Cash discount	e. Recognizes bad debts as they occur
________ 6. Balance sheet approach	f. Sale of receivables to a financial institution
________ 7. Income statement approach	g. Include highly liquid investments
________ 8. Net method	h. Estimate of bad debts
________ 9. Compensating balance	i. Reduction in amount paid by credit customer
________ 10. Discounting	j. Reduction below list price
________ 11. Gross method	k. Cash discount not taken is sales discount forfeited
________ 12. Direct write-off method	l. Bad debt expense determined by estimating amount of accounts receivable expected to be received
________ 13. Factoring	m. Sale of note receivable to a financial institution