ABA Accounts Payable & Receivable Management 2

Question 1

Days Sales Outstanding (DSO) is calculated using which formula?

Accepted Answer

(Accounts Receivable / Net Credit Sales) × 365

Answer

DSO = (Accounts Receivable / Net Credit Sales) × 365, measuring the average number of days it takes to collect payment after a sale.

Question 2

What does a 'three-way match' in accounts payable verify?

Accepted Answer

Purchase order, receiving report, and vendor invoice

Answer

The three-way match compares the purchase order, receiving report, and vendor invoice to ensure the quantity and price are consistent before authorizing payment.

Question 3

Under credit terms of '2/10, net 30,' a buyer receives a 2% discount if payment is made within how many days?

Accepted Answer

10

Answer

The '2/10' portion means a 2% discount is available if the invoice is paid within 10 days of the invoice date.

Question 4

When a company factors its receivables with recourse, the risk of uncollectibility:

Accepted Answer

Remains with the selling company

Answer

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.

Question 5

Which aging bucket is most likely to trigger a bad debt write-off in a standard AR aging schedule?

Accepted Answer

Over 90 days past due

Answer

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.

(ABA) Accredited Business Accountant Practice Test

(ABA) Accredited Business Accountant Practice Test

ABA Accounts Payable & Receivable Management 2