Accounts Payable & Receivable Management Flashcards
7 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 7 Accounts Payable & Receivable Management flashcards as text
Days Sales Outstanding (DSO) is calculated using which formula?
Answer: (Accounts Receivable / Net Credit Sales) × 365
DSO = (Accounts Receivable / Net Credit Sales) × 365, measuring the average number of days it takes to collect payment after a sale.
What does a 'three-way match' in accounts payable verify?
Answer: Purchase order, receiving report, and vendor invoice
The three-way match compares the purchase order, receiving report, and vendor invoice to ensure the quantity and price are consistent before authorizing payment.
Under credit terms of '2/10, net 30,' a buyer receives a 2% discount if payment is made within how many days?
Answer: 10
The '2/10' portion means a 2% discount is available if the invoice is paid within 10 days of the invoice date.
When a company factors its receivables with recourse, the risk of uncollectibility:
Answer: Remains with the selling company
Factoring with recourse means the selling company retains the obligation to reimburse the factor if customers do not pay, so the credit risk stays with the seller.
Which aging bucket is most likely to trigger a bad debt write-off in a standard AR aging schedule?
Answer: Over 90 days past due
Receivables in the 'over 90 days past due' bucket carry the highest probability of being uncollectible and are most frequently targeted for write-off or high reserve rates.
The accounts payable turnover ratio is best used to measure:
Answer: How efficiently a company pays its suppliers
AP turnover = Cost of Goods Sold (or total purchases) / Average Accounts Payable, indicating how many times a company pays off its suppliers within a period.
A debit balance in the Allowance for Doubtful Accounts before the period-end adjustment indicates:
Answer: Actual write-offs exceeded prior estimates
A debit balance (rather than the normal credit balance) in the allowance account means actual write-offs during the period exceeded the prior estimate, leaving the contra account temporarily over-used.