CB Accounts Receivable and Payable Management Flashcards

A bookkeeper writes off a specific customer account as uncollectible under the allowance method by:

Answer: Debiting Allowance for Doubtful Accounts and crediting Accounts Receivable

Under the allowance method, writing off a bad account reduces both the allowance reserve and the specific receivable balance, with no income statement impact.

Days Sales Outstanding (DSO) measures:

Answer: The average number of days to collect receivables

DSO = (Accounts Receivable ÷ Net Credit Sales) × Days in Period, and indicates how efficiently a business collects outstanding credit.

A remittance advice sent with a customer payment helps the bookkeeper:

Answer: Apply the payment to the correct invoice(s)

A remittance advice lists which invoices the payment covers, enabling accurate posting to the customer's subsidiary ledger account.

In accounts payable, a vendor statement reconciliation is performed to:

Answer: Verify that the company's records agree with the vendor's records

Reconciling the vendor statement to the internal accounts payable subledger catches errors, omissions, or duplicate entries before payment.

Which ratio uses accounts payable to measure how quickly a business pays its suppliers?

Answer: Accounts payable turnover ratio

Accounts payable turnover = Cost of Goods Sold ÷ Average Accounts Payable, showing how many times payables are paid off in a period.

Which document confirms that goods ordered from a vendor were actually received in acceptable condition?

Answer: Receiving report

A receiving report, prepared by the receiving department, documents the quantity and condition of goods received from a vendor.