Financial Management for Project Managers Accounts Payable/Receivable 2

Question 1

A vendor invoice arrives with a 2/10 net 30 payment term. What does this mean for the project manager?

Accepted Answer

Get a 2% discount if paid within 10 days, otherwise full amount due in 30 days

Answer

2/10 net 30 means a 2% early payment discount applies if the invoice is paid within 10 days; the full amount is due within 30 days.

Question 2

Which aging bucket in an accounts receivable aging report typically signals the highest collection risk?

Accepted Answer

91+ days

Answer

Receivables in the 91+ days bucket are most at risk for becoming bad debts because they are significantly overdue.

Question 3

A project team receives goods worth $50,000 but the vendor invoice has not yet arrived. How should this be recorded?

Accepted Answer

Debit expense, credit accrued liabilities

Answer

An accrual entry is made to recognize the expense and corresponding liability even without the invoice, following the matching principle.

Question 4

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

Accepted Answer

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

Answer

A PO formally authorizes a purchase and establishes agreed pricing and terms before the transaction occurs.

Question 5

A project manager notices the accounts receivable turnover ratio has declined over two quarters. What does this most likely indicate?

Accepted Answer

Customers are taking longer to pay, indicating collection issues

Answer

A declining AR turnover ratio means receivables are being collected more slowly, which can strain project cash flow.

Financial Management for Project Managers Practice Test