QBO Financial Reporting 3 — Questions and Answers
Question 1: When customizing a QBO report, what does setting a 'Accounting method' filter to 'Cash' do?
- Records transactions only when payment is received or made
- Converts accrual balances to cash basis for the report display (Correct answer)
- Locks the report to prevent further edits
- Removes all unpaid invoices and bills from the view
Correct answer: Converts accrual balances to cash basis for the report display
Switching the accounting method to Cash in a report converts the display so revenue and expenses appear only when cash is received or paid, without changing underlying data.
Question 2: Which QBO report lists all open invoices grouped by how many days past due they are?
- Customer Balance Summary
- Accounts Receivable Aging Detail (Correct answer)
- Sales by Customer Detail
- Unbilled Charges
Correct answer: Accounts Receivable Aging Detail
The Accounts Receivable Aging Detail report groups unpaid invoices by aging buckets such as Current, 1-30 days, 31-60 days, and beyond.
Question 3: What does the 'Net Income' line on a QBO Profit and Loss report represent?
- Total cash collected from customers
- Total revenue minus total expenses for the period (Correct answer)
- Owner's equity at the end of the period
- Gross profit before operating expenses
Correct answer: Total revenue minus total expenses for the period
Net Income is the bottom-line figure showing total revenues minus total expenses, representing the company's profitability for the period.
Question 4: A client wants to see profitability broken down by each product or service sold. Which QBO report should you recommend?
- Profit and Loss by Class
- Sales by Product/Service Summary (Correct answer)
- Income by Customer Summary
- Transaction List by Vendor
Correct answer: Sales by Product/Service Summary
The Sales by Product/Service Summary report breaks down quantity sold, amount, and profitability metrics by each individual product or service.
Question 5: In QBO, which Balance Sheet section would you find 'Accounts Payable'?
- Assets
- Equity
- Current Liabilities (Correct answer)
- Long-Term Liabilities
Correct answer: Current Liabilities
Accounts Payable represents amounts owed to vendors that are typically due within one year, classifying it as a current liability on the Balance Sheet.
Question 6: What happens when you click 'Save customization' after modifying a report in QBO?
- The report is emailed to the company's accountant automatically
- The custom report settings are saved and accessible from Custom Reports (Correct answer)
- The report is locked and cannot be modified again
- The changes apply permanently to all default reports
Correct answer: The custom report settings are saved and accessible from Custom Reports
Saving a customization stores the report's filter and display settings in the Custom Reports tab for easy future access without reconfiguring.
Question 7: Which of the following best describes 'Gross Profit' on a QBO Profit and Loss report?
- Total revenue minus all operating expenses
- Revenue minus Cost of Goods Sold only (Correct answer)
- Net income before tax deductions
- Total sales revenue before any returns
Correct answer: Revenue minus Cost of Goods Sold only
Gross Profit is calculated by subtracting Cost of Goods Sold from total revenue, before operating expenses like payroll or rent are deducted.
QBO Financial Reporting 3
When customizing a QBO report, what does setting a 'Accounting method' filter to 'Cash' do?