CAT Accounts Payable & Receivable Management 3

Question 1

What is 'factoring' in accounts receivable management?

Accepted Answer

Selling accounts receivable to a third party to obtain immediate cash

Answer

Recording a discount for early payment from a customer

Answer

Writing off uncollectible balances against the allowance account

Answer

Grouping receivables by industry sector for reporting

Question 2

What is the normal balance (debit or credit) of the Accounts Payable account in the general ledger?

Accepted Answer

Credit, because it represents a liability

Answer

Debit, because it represents an asset

Answer

Debit, because it reduces equity

Answer

Credit, because it represents revenue

Question 3

A company sets a credit limit of $5,000 for a new customer. What is the primary purpose of establishing this limit?

Accepted Answer

To control the maximum credit exposure and limit bad debt risk

Answer

To ensure the customer pays in cash for all future orders

Answer

To qualify the customer for an early payment discount

Answer

To determine the customer's applicable tax rate

Question 4

When a customer returns merchandise previously purchased on credit, which journal entry correctly records the return in the seller's books?

Accepted Answer

Debit Sales Returns and Allowances; Credit Accounts Receivable

Answer

Debit Accounts Receivable; Credit Sales Returns and Allowances

Answer

Debit Cash; Credit Accounts Receivable

Answer

Debit Sales Revenue; Credit Cash

Question 5

Which accounts payable control helps prevent duplicate payments to the same supplier?

Accepted Answer

Stamping or marking each invoice as 'PAID' immediately upon payment

Answer

Requiring all invoices to be approved by the CEO before payment

Answer

Recording all invoices in alphabetical order by supplier name

Answer

Using a single omnibus check for all suppliers each month

Question 6

In accounts receivable management, what is a 'disputed invoice'?

Accepted Answer

An invoice the customer refuses or contests due to errors, shortages, or quality issues

Answer

An invoice that has been paid in full but not yet recorded

Answer

An invoice issued to a government entity requiring special terms

Answer

An invoice that qualifies for an early payment discount

Question 7

Which of the following best describes the net realizable value (NRV) of accounts receivable on the balance sheet?

Accepted Answer

Gross accounts receivable minus the allowance for doubtful accounts

Answer

The total face value of all outstanding invoices

Answer

Total credit sales minus total cash collected in the period

Answer

Accounts receivable plus accrued interest on overdue balances