CPB / BookKeeping Accounts Receivable and Accounts Payable 2

Question 1

What is the primary purpose of a vendor invoice in the accounts payable process?

Accepted Answer

To document amounts owed by the company to a supplier

Answer

To record sales made to customers

Answer

To authorize the shipment of goods to customers

Answer

To reconcile the company's bank statement

Question 2

Under the allowance method, the entry to record estimated bad debt expense is:

Accepted Answer

Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts

Answer

Debit Bad Debt Expense, Credit Accounts Receivable

Answer

Debit Allowance for Doubtful Accounts, Credit Bad Debt Expense

Answer

Debit Accounts Receivable, Credit Bad Debt Expense

Question 3

What is factoring in the context of accounts receivable?

Accepted Answer

Selling receivables to a third party at a discount for immediate cash

Answer

Breaking receivables into installment payments

Answer

Aging receivables into time buckets for analysis

Answer

Converting receivables to notes payable

Question 4

Which document typically authorizes the accounts payable department to release payment to a vendor?

Accepted Answer

Receiving report matched with the purchase order and vendor invoice

Answer

Sales invoice

Answer

Purchase requisition

Answer

Chart of accounts

Question 5

The Allowance for Doubtful Accounts is classified on the balance sheet as a:

Accepted Answer

Contra-asset account reducing accounts receivable

Answer

Current liability

Answer

Operating expense

Answer

Long-term asset

Question 6

When a specific customer account is written off using the allowance method, the journal entry is:

Accepted Answer

Debit Allowance for Doubtful Accounts, Credit Accounts Receivable

Answer

Debit Bad Debt Expense, Credit Accounts Receivable

Answer

Debit Accounts Receivable, Credit Allowance for Doubtful Accounts

Answer

Debit Cash, Credit Accounts Receivable

Question 7

A vendor offers terms '2/10, net 30.' What does this mean?

Accepted Answer

A 2% discount is available if paid within 10 days; otherwise, full amount is due in 30 days

Answer

Pay within 2 days and get a 10% discount; full amount due in 30 days

Answer

Pay 10% upfront within 2 days; balance due in 30 days

Answer

Interest of 2% per month applies after 10 days, up to 30 days