ERP General Ledger & AP/AR Setup 2 — Questions and Answers
Question 1: In ERP GL setup, what does a 'retained earnings account' hold at the start of a new fiscal year?
- Prior year net income rolled forward automatically (Correct answer)
- Current year budgeted revenue
- Cash balance from the prior period
- Accumulated depreciation totals
Correct answer: Prior year net income rolled forward automatically
The retained earnings account accumulates prior-year net income that the system rolls forward during year-end close.
Question 2: Which AP configuration setting controls whether an invoice must be matched to both a purchase order and a receipt before payment?
- 2-way matching
- 3-way matching (Correct answer)
- 4-way matching
- Invoice tolerance threshold
Correct answer: 3-way matching
3-way matching requires alignment of the purchase order, goods receipt, and vendor invoice before approving payment.
Question 3: An AR aging report groups outstanding customer balances by:
- Customer credit score ranges
- Invoice date buckets such as current, 30, 60, 90 days (Correct answer)
- Sales representative territories
- Product category codes
Correct answer: Invoice date buckets such as current, 30, 60, 90 days
AR aging buckets overdue invoices by time periods to help collections staff prioritize follow-up.
Question 4: What is the purpose of a suspense account in the general ledger?
- To record long-term capital expenditures
- To temporarily hold transactions that cannot yet be fully classified (Correct answer)
- To offset intercompany eliminations
- To track prepaid expenses only
Correct answer: To temporarily hold transactions that cannot yet be fully classified
Suspense accounts park unresolved or unclassified transactions until proper coding is determined.
Question 5: In ERP AP setup, a 'payment terms code' of 'Net 30' means:
- The vendor offers a 30% discount
- Full invoice payment is due within 30 days of the invoice date (Correct answer)
- The invoice must be approved within 30 hours
- 30 invoices can be batched per payment run
Correct answer: Full invoice payment is due within 30 days of the invoice date
Net 30 is a standard payment term requiring the full balance to be paid within 30 days.
Question 6: Which GL account type is reduced by a debit entry in standard double-entry bookkeeping?
- Expense account
- Asset account
- Liability account (Correct answer)
- Cost of goods sold account
Correct answer: Liability account
Liability accounts carry a credit normal balance, so a debit reduces them.
Question 7: In AR setup, a 'dunning process' is used to:
- Automatically apply early-payment discounts
- Send escalating payment reminders to overdue customers (Correct answer)
- Calculate sales tax on invoices
- Reconcile bank statements with customer receipts
Correct answer: Send escalating payment reminders to overdue customers
Dunning automates the sending of increasingly urgent collection notices as invoices age past due.
ERP General Ledger & AP/AR Setup 2
In ERP GL setup, what does a 'retained earnings account' hold at the start of a new fiscal year?