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

Accounts receivable is a current asset representing amounts customers owe the company for goods or services delivered on credit.

Question 2

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

Accepted Answer

Debit Cash, Credit Accounts Receivable

Answer

When cash is received, Cash (asset) increases with a debit and Accounts Receivable (asset) decreases with a credit.

Question 3

What is the normal balance of Accounts Payable?

Accepted Answer

Credit

Answer

Accounts Payable is a liability account and carries a normal credit balance, increasing when purchases are made on credit.

Question 4

An accounts receivable aging report categorizes outstanding balances by:

Accepted Answer

How long invoices have been outstanding

Answer

An aging report groups receivables into time buckets (e.g., 0–30, 31–60, 61–90 days) to identify overdue accounts and estimate bad debt.

Question 5

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

Accepted Answer

Debit Inventory, Credit Accounts Payable

Answer

Purchasing inventory on credit increases the Inventory asset (debit) and creates an obligation recorded as Accounts Payable (credit).

CPB / BookKeeping Practice Test