CB CB Accounts Receivable and Payable Management 2 — Questions and Answers
Question 1: A vendor invoice shows terms '2/10, net 30'. What does the '2/10' mean?
- 2% interest if paid after 10 days
- A 2% discount if paid within 10 days (Correct answer)
- Pay 2% of the total within 10 days
- 2 payments due within 10 days
Correct answer: A 2% discount if paid within 10 days
The term '2/10' means the buyer earns a 2% early-payment discount if the invoice is paid within 10 days.
Question 2: Which journal is typically used to record cash payments to vendors?
- Sales journal
- Cash receipts journal
- Cash payments journal (Correct answer)
- Purchases journal
Correct answer: Cash payments journal
The cash payments journal (also called the cash disbursements journal) records all cash payments, including vendor payments.
Question 3: A three-way match in accounts payable compares the purchase order, receiving report, and:
- Bank statement
- Vendor invoice (Correct answer)
- Sales receipt
- Payroll record
Correct answer: Vendor invoice
A three-way match verifies that the purchase order, receiving report, and vendor invoice all agree before approving payment.
Question 4: What is the effect of a debit balance in the Accounts Payable account?
- Normal; the business owes money
- Abnormal; the business may have overpaid a vendor (Correct answer)
- Normal; a vendor owes the business money
- Abnormal; revenue was understated
Correct answer: Abnormal; the business may have overpaid a vendor
Accounts Payable normally carries a credit balance; a debit balance indicates a possible overpayment or duplicate payment to a vendor.
Question 5: Which document initiates a purchase in a proper internal control environment?
- Vendor invoice
- Receiving report
- Purchase order (Correct answer)
- Remittance advice
Correct answer: Purchase order
A purchase order, issued by the buyer before goods are received, formally authorizes a purchase and initiates the procurement process.
Question 6: Accrued liabilities for unpaid vendor bills are recorded because of the:
- Revenue recognition principle
- Cost principle
- Matching principle (Correct answer)
- Conservatism principle
Correct answer: Matching principle
Accruals ensure expenses are recorded in the period they are incurred, matching costs to the revenues they help generate.
CB CB Accounts Receivable and Payable Management 2
A vendor invoice shows terms '2/10, net 30'.
What does the '2/10' mean?