CPB / BookKeeping Accounts Receivable and Accounts Payable 3

Question 1

What is the primary purpose of a purchase order (PO) in the accounts payable process?

Accepted Answer

To formally authorize a purchase and document agreed terms before goods are received

Answer

A purchase order is issued by the buyer before goods are received, formally authorizing the purchase and documenting quantities, prices, and terms agreed upon.

Question 2

A 'three-way match' in accounts payable involves comparing which three documents?

Accepted Answer

Purchase order, receiving report, and vendor invoice

Answer

A three-way match compares the purchase order (what was ordered), the receiving report (what was received), and the vendor invoice (what is being billed) to ensure all three agree before payment is approved.

Question 3

Net realizable value (NRV) of accounts receivable is calculated as:

Accepted Answer

Gross accounts receivable minus the allowance for doubtful accounts

Answer

NRV equals gross accounts receivable minus the Allowance for Doubtful Accounts, representing the amount the company actually expects to collect.

Question 4

What is a remittance advice?

Accepted Answer

A document sent with payment identifying which invoices are being paid

Answer

A remittance advice accompanies a payment and specifies which invoices or portions of invoices are being paid, allowing the recipient to properly apply the payment.

Question 5

Days Payable Outstanding (DPO) measures:

Accepted Answer

The average number of days a company takes to pay its suppliers

Answer

DPO indicates the average number of days a company takes to pay its vendors, calculated as (Accounts Payable ÷ Cost of Goods Sold) × Number of Days.

CPB / BookKeeping Practice Test

CPB / BookKeeping Practice Test

CPB / BookKeeping Accounts Receivable and Accounts Payable 3