CAPA Financial Reporting Flashcards

What is an AP subledger?

Answer: A detailed record of individual vendor transactions that ties to the general ledger

The AP subledger contains detailed records for each vendor that in total reconcile to the accounts payable balance in the general ledger.

Which of the following would cause a discrepancy between the AP subledger and general ledger?

Answer: Recording a manual journal entry without updating the subledger

Manual journal entries that bypass the subledger change the GL balance without updating the detailed vendor records, creating an out-of-balance condition.

What is the purpose of an AP trial balance?

Answer: To list all open AP balances at a point in time

An AP trial balance lists all outstanding vendor balances at a specific date, used to verify the total AP liability and identify discrepancies.

Which ratio specifically uses accounts payable in its calculation?

Answer: Accounts Payable Turnover Ratio

The accounts payable turnover ratio (purchases divided by average AP) measures how many times a company pays off its AP balance in a given period.

What is the impact on financial statements when accounts payable is understated?

Answer: Liabilities are understated and expenses may also be understated

When AP is understated, the company's liabilities and potentially its expenses are reported lower than actual, making the financial position appear stronger than it is.

What is an 'early booking error' in accounts payable?

Answer: Recording a vendor invoice before goods or services are received

An early booking error occurs when an invoice is recorded before goods are received, violating the matching principle and overstating liabilities in the wrong period.