Accounts Payable & Receivable Management Flashcards
9 cards from real CPB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 9 Accounts Payable & Receivable Management flashcards as text
What is the main purpose of accounts payable?
Answer: Tracking money owed to suppliers
Accounts payable represents the short-term debts a company owes to its suppliers for goods or services purchased on credit. It is a liability account on the balance sheet, reflecting the company's obligation to pay these vendors in the near future.
What is an invoice?
Answer: A request for payment
An invoice is a commercial document issued by a seller to a buyer, detailing the goods or services provided, the quantity, and the agreed-upon prices. It serves as a formal request for payment for those goods or services, initiating the payment process for the buyer.
Which document authorizes a company to pay a supplier?
Answer: Purchase order
A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. It serves as an official authorization for the supplier to provide the specified goods or services, committing the buyer to pay upon fulfillment.
What is accounts receivable?
Answer: Money owed to the company
Accounts receivable represents the money that customers owe to a company for goods or services that have been delivered or rendered on credit. It is an asset on the balance sheet, reflecting the company's right to collect payment in the future.
What is the effect of late payment on accounts payable?
Answer: Damages supplier relationships
Paying accounts payable late can strain relationships with suppliers, potentially leading to less favorable terms, delayed shipments, or even refusal to do business in the future. Maintaining good payment habits is crucial for fostering strong, reliable supplier partnerships and ensuring continued supply chain efficiency.
Which document confirms receipt of goods from a supplier?
Answer: Packing slip
A packing slip is a document included with a shipment of goods that lists the items enclosed. Its primary purpose is to confirm the contents of the package, allowing the recipient to verify that all ordered items have been received against the purchase order and invoice.
What is a common method to manage accounts receivable?
Answer: Send invoices promptly
Sending invoices promptly is a crucial method for managing accounts receivable effectively. Timely invoicing ensures that customers are aware of their payment obligations sooner, which can significantly reduce the average collection period and improve cash flow for the business.
What does 'aging of accounts receivable' mean?
Answer: Grouping receivables by due dates
Aging of accounts receivable is a process that categorizes a company's outstanding invoices based on the length of time they have been unpaid. This analysis helps businesses identify overdue accounts, assess the likelihood of collection, and prioritize collection efforts for maximum recovery.
Why is it important to reconcile accounts payable regularly?
Answer: To prevent errors and fraud
Regularly reconciling accounts payable involves comparing the company's records of what it owes to suppliers with the suppliers' statements. This process helps identify discrepancies, ensures all liabilities are accurately recorded, and is a critical internal control for preventing errors, duplicate payments, or fraudulent activities.