CAT Accounts Payable & Receivable Management 2

Question 1

A vendor statement reconciliation involves comparing which two records?

Accepted Answer

The company's accounts payable ledger with the supplier's statement of account

Answer

Vendor statement reconciliation matches the company's AP records against the supplier's statement to identify and resolve discrepancies.

Question 2

Which financial ratio measures how efficiently a company collects its accounts receivable?

Accepted Answer

Accounts receivable turnover ratio

Answer

The accounts receivable turnover ratio (net credit sales ÷ average AR) indicates how many times receivables are collected in a period.

Question 3

Under the allowance method, what is the net effect on total assets when a specific customer balance is written off as uncollectible?

Accepted Answer

Total assets remain unchanged

Answer

Under the allowance method, the write-off debits Allowance for Doubtful Accounts and credits Accounts Receivable, leaving net realizable value and total assets unchanged.

Question 4

What is Days Sales Outstanding (DSO) used to measure in accounts receivable management?

Accepted Answer

The average number of days it takes to collect payment after a sale

Answer

DSO (accounts receivable ÷ average daily credit sales) measures the average collection period, indicating how quickly credit sales are converted to cash.

Question 5

Under the direct write-off method for bad debts, when is bad debt expense recognized?

Accepted Answer

When a specific account is determined to be uncollectible

Answer

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.

(CAT) Certified Accounting Technician Practice Test

(CAT) Certified Accounting Technician Practice Test

CAT Accounts Payable & Receivable Management 2