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Identify and Briefly Describe the Circumstances That Are of Particular

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Essay

Identify and briefly describe the circumstances that are of particular importance to negotiators with respect to evaluating risks associated with increases in the cost of materials used to produce a product.Identify and briefly describe contractual terms that may be applied to reduce the risk of market price fluctuations.


Definitions:

Percentage of Receivables Basis

An accounting method to estimate the allowance for doubtful accounts based on the expected uncollectibility of accounts receivable.

Allowance for Doubtful Accounts

A contra-asset account that reduces the total receivables reported on the balance sheet to reflect the amount expected to be uncollectible.

Percentage of Sales Method

A method used for financial forecasting that predicts future occurrences, such as expenses or inventory needs, based on a fixed percentage of sales.

Bad Debt Expense

The cost associated with accounts receivable that a company is unable to collect, considered as a loss.

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