#1
Which financial statement reports a company's financial performance over a specific period?
Income Statement
ExplanationReports financial performance.
#2
In financial reporting, what is the primary purpose of the cash flow statement?
To provide information about the company's cash receipts and cash payments
ExplanationProvides cash transaction info.
#3
What is the primary objective of implementing a credit policy in managing accounts receivable?
To minimize bad debts
ExplanationMinimizes bad debts.
#4
How does a decrease in the accounts receivable turnover ratio impact a company's liquidity?
Decreases liquidity
ExplanationReduces liquidity.
#5
What is the primary purpose of the collection policy in managing accounts receivable?
To minimize bad debts
ExplanationMinimizes bad debts.
#6
What is the primary purpose of managing accounts receivable in financial reporting?
To ensure timely collection of cash
ExplanationEnsures timely cash collection.
#7
How is the accounts receivable turnover ratio calculated?
Net Sales / Average Accounts Receivable
ExplanationCalculates turnover ratio.
#8
What is the aging of accounts receivable used for in financial reporting?
Estimating the collectability of individual receivables based on their age
ExplanationEstimates receivable collectability.
#9
Which method of estimating bad debts is based on a percentage of credit sales?
Allowance Method
ExplanationEstimates bad debts based on sales.
#10
What is the purpose of the sales discount in managing accounts receivable?
To encourage early payment by customers
ExplanationEncourages early payments.
#11
Which financial statement is most affected by the allowance for doubtful accounts?
Income Statement
ExplanationAffected financial statement.
#12
What is the allowance for doubtful accounts used for in financial reporting?
To recognize expected credit losses
ExplanationRecognizes credit losses.
#13
In the context of bad debt, what does the 'direct write-off method' involve?
Writing off specific uncollectible accounts as they are identified
ExplanationWrites off uncollectible accounts.
#14
What does the term 'net realizable value' refer to in the context of accounts receivable?
The estimated collectible amount of accounts receivable
ExplanationRefers to collectible amount.
#15
What impact does a decrease in the accounts receivable turnover ratio have on a company's financial health?
Negative impact
ExplanationDecreases financial health.
#16
What is the significance of the debt collection period in accounts receivable management?
It indicates the average time it takes to collect outstanding receivables
ExplanationIndicates collection time.
#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
ExplanationRecognizes on cash receipt.