#1
What is accounts receivable?
Money owed by customers for goods or services purchased on credit
ExplanationAccounts receivable represents money owed by customers for credit purchases.
#2
Which of the following is not a common accounts receivable term?
Accounts payable
ExplanationAccounts payable is not a term related to accounts receivable; it refers to money owed by a company to its suppliers.
#3
Which financial statement typically reports accounts receivable?
Balance sheet
ExplanationAccounts receivable is reported on the balance sheet.
#4
What does the allowance for doubtful accounts represent?
The estimated amount of accounts receivable that may become uncollectible
ExplanationThe allowance for doubtful accounts represents the estimated uncollectible amount of accounts receivable.
#5
What does the aging of accounts receivable refer to?
The process of categorizing accounts based on their age and likelihood of collection
ExplanationAging of accounts receivable involves categorizing accounts based on age to assess their collectibility.
#6
Which method of accounts receivable management focuses on increasing the speed of cash collections?
Lockbox banking
ExplanationLockbox banking aims to expedite cash collections by directing customer payments to a designated post office box.
#7
What is the direct write-off method in accounts receivable?
Writing off bad debts only when they are actually determined to be uncollectible
ExplanationThe direct write-off method involves recognizing bad debts only when they are confirmed as uncollectible.
#8
What is the formula for calculating the accounts receivable turnover ratio?
Net credit sales / Average accounts receivable
ExplanationThe accounts receivable turnover ratio is calculated as net credit sales divided by the average accounts receivable.
#9
What is the purpose of calculating the accounts receivable turnover ratio?
To evaluate the efficiency of credit management
ExplanationThe accounts receivable turnover ratio assesses the effectiveness of credit management in collecting receivables.