ABA Credit & Collections Management Flashcards
6 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 ABA Credit & Collections Management flashcards as text
Under the allowance method, how is bad debt expense recorded?
Answer: Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts
Under the allowance method, bad debt expense is recorded by debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts.
What is a promissory note in credit management?
Answer: A written promise to pay a specific amount at a specific time
A promissory note is a written, legally binding agreement in which one party promises to pay a specific amount to another party at a defined future date.
Which collection letter sequence is typically followed when a customer becomes delinquent?
Answer: Reminder, demand letter, final notice, legal action
The standard collection sequence progresses from a gentle reminder to a demand letter, then a final notice, and ultimately legal action if payment is not received.
What is the 'net 30' payment term?
Answer: Payment is due within 30 days of the invoice date
'Net 30' means the full invoice amount is due within 30 days of the invoice date with no discount applied.
What does '2/10 net 30' mean on an invoice?
Answer: 2% discount if paid within 10 days, full amount due in 30 days
'2/10 net 30' means the customer can take a 2% discount if they pay within 10 days; otherwise, the full amount is due within 30 days.
When should a business write off an uncollectible account under the direct write-off method?
Answer: When the account is determined to be uncollectible
Under the direct write-off method, an account is written off when it is specifically determined to be uncollectible, not based on estimates.