AAT L3 Accounts Payable & Receivable Advanced 3 — Questions and Answers
Question 1: A credit note received from a supplier reduces:
- The amount owed by the business to the supplier (Correct answer)
- The amount owed by customers to the business
- The business's bank balance
- The VAT reclaimable on purchases
Correct answer: The amount owed by the business to the supplier
A credit note from a supplier reduces the outstanding balance on the supplier's account in the purchase ledger, reflecting goods returned, overcharges corrected, or allowances given.
Question 2: The sales ledger control account (SLCA) opening balance was £18,000. During the month, invoices of £42,000 were issued, receipts of £35,000 were collected, and discounts of £1,000 were allowed. What is the closing balance?
- £24,000 (Correct answer)
- £25,000
- £26,000
- £23,000
Correct answer: £24,000
Closing balance = £18,000 + £42,000 − £35,000 − £1,000 = £24,000. Invoices increase the balance; receipts and discounts reduce it.
Question 3: Which of the following is a method used to assess the creditworthiness of a new trade customer?
- Checking the customer's social media profile
- Obtaining a credit reference agency report, bank reference, or trade references (Correct answer)
- Asking the customer to provide their own financial forecast
- Extending credit immediately and reviewing after one year
Correct answer: Obtaining a credit reference agency report, bank reference, or trade references
Before granting credit, businesses typically obtain a credit reference agency report (showing payment history and county court judgements), bank references, and trade references from other suppliers the customer uses.
Question 4: In accounts payable, an accrual at period end is required when:
- A supplier invoice has been received and paid within the period
- Goods or services have been received before the period end but the invoice has not yet been received (Correct answer)
- A purchase order has been raised but goods have not yet arrived
- A supplier has been paid in advance
Correct answer: Goods or services have been received before the period end but the invoice has not yet been received
An accrual is needed when an expense has been incurred (goods or services received) before the period end, but the supplier has not yet raised or sent the invoice — ensuring the cost is recognised in the correct period.
Question 5: Which document triggers the recording of a purchase in the accounts payable ledger?
- Purchase requisition
- Supplier's quotation
- Purchase order raised by the business
- Supplier's invoice (matched and approved) (Correct answer)
Correct answer: Supplier's invoice (matched and approved)
The supplier's invoice, once received and matched against the purchase order and goods received note, is the document that triggers the posting of the purchase to the purchase ledger and the general ledger.
Question 6: Prompt payment of supplier invoices is important because it:
- Reduces the VAT liability
- Maintains good supplier relationships and may retain early payment discounts (Correct answer)
- Eliminates the need for purchase orders
- Reduces the amount owed to HMRC
Correct answer: Maintains good supplier relationships and may retain early payment discounts
Timely payment maintains supplier goodwill, ensures continued supply of goods and services, may qualify for settlement discounts, and protects the business's credit reputation with suppliers.
AAT L3 Accounts Payable & Receivable Advanced 3
A credit note received from a supplier reduces: