Accounts Receivable and Accounts Payable Flashcards
7 cards from real CPB / BookKeeping practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Accounts Receivable and Accounts Payable flashcards as text
What is the primary purpose of a vendor invoice in the accounts payable process?
Answer: To document amounts owed by the company to a supplier
A vendor invoice is the bill received from a supplier that documents the goods or services provided and the amount owed by the purchasing company.
Under the allowance method, the entry to record estimated bad debt expense is:
Answer: Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts
The allowance method requires estimating uncollectible accounts by debiting Bad Debt Expense and crediting the contra asset Allowance for Doubtful Accounts.
What is factoring in the context of accounts receivable?
Answer: Selling receivables to a third party at a discount for immediate cash
Factoring involves selling accounts receivable to a factor (third party) at a discount, allowing the company to receive immediate cash rather than waiting for customer payments.
Which document typically authorizes the accounts payable department to release payment to a vendor?
Answer: Receiving report matched with the purchase order and vendor invoice
A three-way match — comparing the purchase order, receiving report, and vendor invoice — authorizes payment by confirming that what was ordered and received matches what is being billed.
The Allowance for Doubtful Accounts is classified on the balance sheet as a:
Answer: Contra-asset account reducing accounts receivable
The Allowance for Doubtful Accounts is a contra-asset that offsets gross accounts receivable to present the net realizable value on the balance sheet.
When a specific customer account is written off using the allowance method, the journal entry is:
Answer: Debit Allowance for Doubtful Accounts, Credit Accounts Receivable
Writing off a specific bad debt under the allowance method debits the Allowance (reducing the reserve) and credits Accounts Receivable (removing the balance), with no impact on the income statement.
A vendor offers terms '2/10, net 30.' What does this mean?
Answer: A 2% discount is available if paid within 10 days; otherwise, full amount is due in 30 days
Terms '2/10, net 30' mean the buyer earns a 2% early-payment discount if the invoice is paid within 10 days; otherwise the full amount is due within 30 days.