Accounts Payable & Receivable Advanced Flashcards
6 cards from real AAT L3 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Accounts Payable & Receivable Advanced flashcards as text
An overdue customer account is passed to a debt collection agency when:
Answer: Internal collection attempts have failed and the debt is significantly overdue
Debt collection agencies are used as a last resort after internal credit control has failed to recover an overdue debt; they typically charge a commission on amounts recovered.
The purpose of a customer credit application form is to:
Answer: Collect information needed to assess whether to extend credit and set appropriate credit terms
A credit application collects the customer's business details, financial information, bank and trade references, and directors' details, enabling the business to make an informed credit assessment before granting credit.
Which of the following ratios measures how quickly customers are paying their invoices?
Answer: Receivables days (debtor days)
Receivables days = (Trade receivables / Revenue) × 365. It shows the average number of days customers take to pay, enabling comparison against credit terms and industry benchmarks.
Discounts allowed are recorded in the accounts as:
Answer: A debit to discounts allowed expense and a credit to trade receivables
Discounts allowed are given to customers for early payment; they are an expense (debit Discounts Allowed) and reduce the trade receivable balance (credit Trade Receivables).
A business has total receivables of £120,000 and annual credit sales of £600,000. What are the receivables days?
Answer: 73 days
Receivables days = (£120,000 / £600,000) × 365 = 0.2 × 365 = 73 days. This means customers take on average 73 days to pay.
The payment run in accounts payable typically involves:
Answer: Batching approved invoices together and processing payments on scheduled payment dates
A payment run batches approved payable invoices together and processes them on scheduled dates (e.g., weekly or twice monthly), improving efficiency, cash flow management, and control over payments.