#1
Which financial statement reports a company's financial performance over a specific period?
Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Retained Earnings
#2
In financial reporting, what is the primary purpose of the cash flow statement?
To show the company's financial position at a specific point in time
To disclose changes in equity during a period
To provide information about the company's cash receipts and cash payments
To report the company's profitability over a period
#3
What is the primary objective of implementing a credit policy in managing accounts receivable?
To increase sales revenue
To minimize bad debts
To discourage customers from making purchases
To expedite the collection process
#4
How does a decrease in the accounts receivable turnover ratio impact a company's liquidity?
Improves liquidity
No impact on liquidity
Decreases liquidity
It depends on other financial metrics
#5
What is the primary purpose of the collection policy in managing accounts receivable?
To increase sales revenue
To minimize bad debts
To discourage customers from making purchases
To expedite the billing process
#6
What is the primary purpose of managing accounts receivable in financial reporting?
To increase shareholder value
To maximize sales revenue
To ensure timely collection of cash
To reduce income taxes
#7
How is the accounts receivable turnover ratio calculated?
Net Sales / Average Accounts Receivable
Average Accounts Receivable / Net Sales
Net Income / Average Accounts Receivable
Average Accounts Receivable / Net Income
#8
What is the aging of accounts receivable used for in financial reporting?
Determining the historical cost of accounts receivable
Calculating the allowance for doubtful accounts
Estimating the collectability of individual receivables based on their age
Recording the sale of accounts receivable to a third party
#9
Which method of estimating bad debts is based on a percentage of credit sales?
Direct Write-Off Method
Allowance Method
Aging of Accounts Receivable
Net Realizable Value Method
#10
What is the purpose of the sales discount in managing accounts receivable?
To encourage early payment by customers
To increase the selling price of goods
To discourage customers from making purchases
To calculate the cost of goods sold
#11
Which financial statement is most affected by the allowance for doubtful accounts?
Income Statement
Balance Sheet
Statement of Cash Flows
Statement of Retained Earnings
#12
What is the allowance for doubtful accounts used for in financial reporting?
To increase reported revenue
To offset the credit sales
To recognize expected credit losses
To calculate accounts payable
#13
In the context of bad debt, what does the 'direct write-off method' involve?
Estimating uncollectible accounts based on a percentage of credit sales
Writing off specific uncollectible accounts as they are identified
Setting up an allowance for doubtful accounts
Transferring bad debts to a third-party collection agency
#14
What does the term 'net realizable value' refer to in the context of accounts receivable?
The total value of accounts receivable without any deductions
The estimated collectible amount of accounts receivable
The historical cost of accounts receivable
The market value of accounts receivable
#15
What impact does a decrease in the accounts receivable turnover ratio have on a company's financial health?
Positive impact
No impact
Negative impact
It depends on other financial metrics
#16
What is the significance of the debt collection period in accounts receivable management?
It represents the time taken to pay off all debts
It indicates the average time it takes to collect outstanding receivables
It measures the profitability of a company
It determines the company's credit rating
#17
How does the cash basis of accounting differ from the accrual basis in recognizing accounts receivable?
Cash basis recognizes accounts receivable when cash is received
Accrual basis recognizes accounts receivable when earned, regardless of cash receipt
Cash basis recognizes accounts receivable when incurred, regardless of cash payment
Accrual basis recognizes accounts receivable only at year-end