ABA Accounts Payable & Receivable Management

Question 1

What is the normal balance of an Accounts Receivable account?

Accepted Answer

Debit

Answer

Accounts Receivable is an asset account, and asset accounts carry a normal debit balance.

Question 2

Which document typically initiates the accounts payable process when a company purchases goods?

Accepted Answer

Purchase order

Answer

A purchase order is issued by the buyer to the vendor to formally request goods or services, initiating the AP cycle.

Question 3

Under the accrual basis of accounting, when is accounts receivable recorded?

Accepted Answer

When goods or services are delivered

Answer

Accrual accounting requires revenue—and the related receivable—to be recognized when the earnings process is complete (delivery of goods or services).

Question 4

The Allowance for Doubtful Accounts is classified as which type of account?

Accepted Answer

Contra-asset

Answer

Allowance for Doubtful Accounts is a contra-asset account that reduces the gross Accounts Receivable balance to its net realizable value.

Question 5

Under the direct write-off method, bad debt expense is recorded when:

Accepted Answer

A specific account is determined to be uncollectible

Answer

The direct write-off method recognizes bad debt expense only when a specific receivable is identified as uncollectible, which can violate the matching principle.

(ABA) Accredited Business Accountant Practice Test

(ABA) Accredited Business Accountant Practice Test

ABA Accounts Payable & Receivable Management