CPB / BookKeeping Accounts Receivable and Accounts Payable

Question 1

What does accounts receivable represent on a company's balance sheet?

Accepted Answer

Money owed to the company by its customers

Answer

Money owed by the company to its suppliers

Answer

Cash held in the company's bank account

Answer

Prepaid expenses not yet recognized

Question 2

When a customer pays an outstanding invoice in full, which journal entry is correct?

Accepted Answer

Debit Cash, Credit Accounts Receivable

Answer

Debit Accounts Receivable, Credit Cash

Answer

Debit Accounts Payable, Credit Cash

Answer

Debit Revenue, Credit Accounts Receivable

Question 3

What is the normal balance of Accounts Payable?

Accepted Answer

Credit

Answer

Debit

Answer

Either debit or credit depending on terms

Answer

Zero, as it nets against accounts receivable

Question 4

An accounts receivable aging report categorizes outstanding balances by:

Accepted Answer

How long invoices have been outstanding

Answer

Customer credit rating

Answer

Invoice amount in ascending order

Answer

Product or service type sold

Question 5

When a company purchases inventory on credit terms, the correct journal entry is:

Accepted Answer

Debit Inventory, Credit Accounts Payable

Answer

Debit Accounts Payable, Credit Inventory

Answer

Debit Cash, Credit Inventory

Answer

Debit Inventory, Credit Accounts Receivable

Question 6

A credit memo issued to a customer in accounts receivable typically results in:

Accepted Answer

A reduction in the amount the customer owes

Answer

An increase in the customer's account balance

Answer

A cash payment made to the customer immediately

Answer

An increase in the company's revenue

Question 7

Which of the following best distinguishes accounts payable from notes payable?

Accepted Answer

Accounts payable arises from credit purchases; notes payable is a formal written promise to pay

Answer

Accounts payable always carries interest; notes payable does not

Answer

Notes payable is always short-term; accounts payable can be long-term

Answer

Accounts payable is an asset; notes payable is a liability