CAPA CAPA Financial Reporting 1 — Questions and Answers
Question 1: What is the primary purpose of an accounts payable aging report?
- To track outstanding vendor invoices by due date (Correct answer)
- To calculate total revenue for the period
- To reconcile bank statements
- To record depreciation
Correct answer: To track outstanding vendor invoices by due date
An AP aging report categorizes outstanding vendor invoices by how long they have been outstanding to help manage payment timing and cash flow.
Question 2: Which financial statement directly reflects accounts payable balances?
- Income Statement
- Balance Sheet (Correct answer)
- Cash Flow Statement
- Statement of Retained Earnings
Correct answer: Balance Sheet
Accounts payable appears as a current liability on the balance sheet, representing amounts owed to vendors.
Question 3: When an invoice is recorded in accounts payable, which account is typically debited?
- Accounts Payable
- Cash
- An expense or asset account (Correct answer)
- Revenue
Correct answer: An expense or asset account
When recording an invoice, the expense or asset account is debited and accounts payable is credited under double-entry accounting.
Question 4: What does 'accrued liabilities' in AP refer to?
- Invoices received but not yet approved
- Expenses incurred but not yet invoiced (Correct answer)
- Payments made in advance
- Duplicate invoices
Correct answer: Expenses incurred but not yet invoiced
Accrued liabilities represent expenses the company has incurred but has not yet received a vendor invoice for, requiring an accrual journal entry.
Question 5: Which metric measures how quickly a company pays its suppliers?
- Days Sales Outstanding (DSO)
- Days Payable Outstanding (DPO) (Correct answer)
- Current Ratio
- Quick Ratio
Correct answer: Days Payable Outstanding (DPO)
Days Payable Outstanding (DPO) measures the average number of days a company takes to pay its accounts payable to vendors.
Question 6: What is a key AP financial reporting requirement at period end?
- Issuing new purchase orders
- Accruing for invoices received but not yet processed (Correct answer)
- Approving new vendor accounts
- Updating the company's credit rating
Correct answer: Accruing for invoices received but not yet processed
At period end, AP must accrue for invoices received but not processed to ensure expenses are reported in the correct accounting period per GAAP.
CAPA CAPA Financial Reporting 1
What is the primary purpose of an accounts payable aging report?