#1
What is accounts receivable?
The total amount of money owed to a business by its customers for goods or services delivered
ExplanationMoney owed by customers for goods or services.
#2
What is the difference between accounts receivable and accounts payable?
Accounts receivable represents money owed to a business, while accounts payable represents money owed by a business.
ExplanationReceivable vs. payable debts.
#3
Which of the following is an example of an accounts receivable turnover ratio?
100 times
ExplanationExample of turnover ratio.
#4
Which financial statement would include accounts receivable?
Balance sheet
ExplanationAccounts on the balance sheet.
#5
Which method recognizes revenue when cash is received from customers?
Cash accounting
ExplanationRevenue recognized on cash receipt.
#6
Which of the following is a common method used to manage accounts receivable?
Offering discounts for early payment
ExplanationOffering discounts for early payments.
#7
What is the formula to calculate the accounts receivable turnover ratio?
Net Credit Sales / Average Accounts Receivable
ExplanationFormula for calculating turnover ratio.
#8
What does a high accounts receivable turnover ratio indicate?
Efficient management of accounts receivable
ExplanationEfficient management indicated by high ratio.
#9
What is the aging of accounts receivable?
A process of classifying accounts receivable by the length of time they have been outstanding
ExplanationClassifying receivables by age.
#10
What is the allowance for doubtful accounts?
A contra-asset account representing the estimated amount of accounts receivable that may not be collected
ExplanationEstimated uncollectible accounts.
#11
Which of the following is a disadvantage of factoring accounts receivable?
Loss of control over customer relationships
ExplanationLoss of control over relationships.
#12
What are some strategies to reduce accounts receivable days outstanding?
Aggressively pursuing collections from customers with overdue balances
ExplanationAggressive pursuit of overdue balances.
#13
What is the impact of a write-off of accounts receivable on financial statements?
Decrease in assets and equity
ExplanationDecrease in assets and equity.
#14
Which of the following is true regarding the securitization of accounts receivable?
It involves selling accounts receivable to a financial institution in exchange for cash
ExplanationSelling receivables for cash.
#15
What is the significance of the days sales outstanding (DSO) ratio?
It indicates the average number of days it takes for a company to collect payment after a sale
ExplanationAverage days to collect payment after a sale.
#16
How does the percentage of credit sales method estimate bad debt expense?
Based on the percentage of credit sales
ExplanationEstimating bad debt based on credit sales.
#17
What is the significance of the collection period ratio?
It indicates the average number of days it takes for a company to collect payment after a sale.
ExplanationAverage days to collect payment after a sale.