Managing Accounts Receivable and Uncollectible Debts Quiz
Test your understanding of managing accounts receivable and uncollectible debts with these insightful quiz questions on accounting principles.
#1
Which of the following best describes accounts receivable?
Money owed by customers for goods or services sold on credit
Money owed by the company to its suppliers
Money invested in stocks and bonds
Cash reserves held by the company
#2
What is the primary goal of managing accounts receivable?
To maximize the number of customers
To minimize the amount of cash collected
To minimize the time it takes to collect outstanding debts
To maximize the number of uncollectible debts
#3
What is the allowance for doubtful accounts?
A reserve for uncollectible debts
A fund for employee benefits
A budget for marketing expenses
A ledger for inventory tracking
#4
Which method of estimating uncollectible accounts uses a percentage of total credit sales?
Aging of accounts receivable method
Direct write-off method
Percentage of sales method
Accounts receivable turnover method
#5
What is the aging of accounts receivable method used for?
To calculate the allowance for doubtful accounts
To determine the creditworthiness of customers
To calculate the interest on outstanding debts
To categorize outstanding receivables by their age
#6
Which financial ratio measures a company's ability to collect its accounts receivable?
Current ratio
Debt-to-equity ratio
Accounts receivable turnover ratio
Return on assets ratio
#7
What is the journal entry to write off a specific uncollectible account using the allowance method?
Debit Bad Debt Expense, Credit Accounts Receivable
Debit Allowance for Doubtful Accounts, Credit Accounts Receivable
Debit Accounts Receivable, Credit Allowance for Doubtful Accounts
Debit Cash, Credit Accounts Receivable
#8
Under the direct write-off method, when is a bad debt expense recognized?
At the end of the fiscal year
When a customer's account becomes overdue
When an account is determined to be uncollectible
At the time of making a credit sale
#9
Which financial statement would show the amount of uncollectible debts written off during a period?
Income statement
Balance sheet
Statement of cash flows
Statement of changes in equity
#10
Which method of estimating uncollectible accounts is required for financial reporting purposes under Generally Accepted Accounting Principles (GAAP)?
Percentage of sales method
Direct write-off method
Aging of accounts receivable method
Accounts receivable turnover method
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