Accounts Payable & Receivable Management Flashcards
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Read the first 7 Accounts Payable & Receivable Management flashcards as text
A vendor statement reconciliation involves comparing which two records?
Answer: The company's accounts payable ledger with the supplier's statement of account
Vendor statement reconciliation matches the company's AP records against the supplier's statement to identify and resolve discrepancies.
Which financial ratio measures how efficiently a company collects its accounts receivable?
Answer: Accounts receivable turnover ratio
The accounts receivable turnover ratio (net credit sales ÷ average AR) indicates how many times receivables are collected in a period.
Under the allowance method, what is the net effect on total assets when a specific customer balance is written off as uncollectible?
Answer: Total assets remain unchanged
Under the allowance method, the write-off debits Allowance for Doubtful Accounts and credits Accounts Receivable, leaving net realizable value and total assets unchanged.
What is Days Sales Outstanding (DSO) used to measure in accounts receivable management?
Answer: The average number of days it takes to collect payment after a sale
DSO (accounts receivable ÷ average daily credit sales) measures the average collection period, indicating how quickly credit sales are converted to cash.
Under the direct write-off method for bad debts, when is bad debt expense recognized?
Answer: When a specific account is determined to be uncollectible
The direct write-off method records bad debt expense only when a specific receivable is deemed uncollectible, which does not match expense with the related revenue.
What does Days Payable Outstanding (DPO) measure for a company?
Answer: The average number of days the company takes to pay its suppliers
DPO (accounts payable ÷ average daily cost of goods sold) measures how long a company takes to pay its trade creditors.
Which of the following best describes a remittance advice in the accounts payable process?
Answer: A document sent with payment identifying which invoices are being paid
A remittance advice accompanies a payment and specifies which invoices or portions of invoices are being settled, helping the supplier apply the payment correctly.