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

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.

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

The allowance method requires estimating uncollectible accounts by debiting Bad Debt Expense and crediting the contra asset Allowance for Doubtful Accounts.

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

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.

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

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.

Question 5

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

Accepted Answer

Contra-asset account reducing accounts receivable

Answer

The Allowance for Doubtful Accounts is a contra-asset that offsets gross accounts receivable to present the net realizable value on the balance sheet.

CPB / BookKeeping Practice Test

CPB / BookKeeping Practice Test

CPB / BookKeeping Accounts Receivable and Accounts Payable 2