Business Services Business Services Finance & Accounting 1 — Questions and Answers
Question 1: What is accounts payable (AP) in a business services context?
- Money owed to the business by customers
- Money the business owes to suppliers and vendors (Correct answer)
- Employee salary expenses
- Long-term bank loans
Correct answer: Money the business owes to suppliers and vendors
Accounts payable represents short-term liabilities a company owes to its suppliers or vendors for goods and services received.
Question 2: Which financial document summarizes a company's revenues and expenses over a specific period?
- Balance sheet
- Income statement (Correct answer)
- Cash flow statement
- Statement of retained earnings
Correct answer: Income statement
The income statement (profit and loss statement) shows revenues, expenses, and net profit or loss over a given reporting period.
Question 3: What does 'Days Sales Outstanding' (DSO) measure?
- Average number of days inventory is held
- Average number of days to collect payment after a sale (Correct answer)
- Number of days a project runs over deadline
- Duration of employee onboarding
Correct answer: Average number of days to collect payment after a sale
DSO measures the average number of days it takes a company to collect payment from customers after making a sale.
Question 4: In financial services outsourcing, what is 'procure-to-pay' (P2P)?
- A marketing funnel model
- An end-to-end process from purchasing goods to making payment to vendors (Correct answer)
- A customer loyalty program
- A revenue recognition standard
Correct answer: An end-to-end process from purchasing goods to making payment to vendors
Procure-to-pay (P2P) covers the complete cycle from raising a purchase requisition through ordering, receiving, and paying for goods or services.
Question 5: Which US accounting standard do publicly traded US companies use for financial reporting?
- IFRS
- GAAP (Correct answer)
- FASB-only rules
- SOX
Correct answer: GAAP
US Generally Accepted Accounting Principles (GAAP) are the accounting standards used by US public companies for financial reporting.
Question 6: What is the purpose of a three-way match in accounts payable?
- Matching three bank accounts during reconciliation
- Verifying the purchase order, goods receipt, and vendor invoice agree before payment (Correct answer)
- Comparing three vendors' prices
- Reconciling three months of payroll
Correct answer: Verifying the purchase order, goods receipt, and vendor invoice agree before payment
A three-way match ensures that the purchase order, receiving report, and vendor invoice align before authorizing payment, reducing errors and fraud.
Business Services Business Services Finance & Accounting 1
What is accounts payable (AP) in a business services context?