CarePair, a Small Business Specializing in Making and Distributing Hospital

question 4

Multiple Choice

CarePair, a small business specializing in making and distributing hospital gowns to medical facilities, often sells its product on credit. The company maintains a ledger that divides accounts receivable into age categories based on the length of time they have been outstanding. Receivables 1-6 months old are deemed grade A (regular business) ; 7-12, grade B (overdue business) ; and 13-24, grade C (delinquent business) ; those accounts receivable over 24 months old are turned over to a collection agency. CarePair is relying on ____ to keep track of accounts receivable.

• A) a collection categorization
• B) an aging schedule
• C) a delinquent adjustment schedule
• D) a financial credit schedule

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Definitions:

Corporations

Legal entities that are separate and distinct from their owners, established to conduct business, earn profit, and be endowed with legal rights.

Adjusting Entries

Journal entries made at the end of an accounting period to update accounts for accruals and deferrals not yet recorded through daily transactions.

Closing Entries

Entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent owner’s equity account, Owner’s Capital.

Correcting Entries

Entries to correct errors made in recording transactions.