CB CB Accounts Receivable and Payable Management 1 — Questions and Answers
Question 1: Which ledger records amounts owed TO your business by customers?
- Accounts payable ledger
- Accounts receivable ledger (Correct answer)
- General ledger
- Cash receipts journal
Correct answer: Accounts receivable ledger
The accounts receivable ledger tracks money customers owe to the business for goods or services delivered on credit.
Question 2: An aging report categorizes outstanding receivables by:
- Customer industry
- Invoice amount
- How long invoices have been outstanding (Correct answer)
- Geographic region
Correct answer: How long invoices have been outstanding
An aging report groups unpaid invoices into time buckets (0–30, 31–60, 61–90, 90+ days) to identify overdue accounts.
Question 3: When a customer pays their invoice, the bookkeeper debits Cash and credits:
- Accounts Payable
- Sales Revenue
- Accounts Receivable (Correct answer)
- Unearned Revenue
Correct answer: Accounts Receivable
Receiving a customer payment reduces the receivable balance, so Accounts Receivable is credited and Cash is debited.
Question 4: A credit memo issued to a customer typically results in:
- An increase in accounts receivable
- A decrease in accounts receivable (Correct answer)
- An increase in accounts payable
- A decrease in cash
Correct answer: A decrease in accounts receivable
A credit memo reduces the amount the customer owes, thereby decreasing the accounts receivable balance.
Question 5: The allowance method of accounting for bad debts is preferred over the direct write-off method because it:
- Requires less journal entries
- Matches bad debt expense to the period the sale occurred (Correct answer)
- Increases net income
- Eliminates uncollectible accounts
Correct answer: Matches bad debt expense to the period the sale occurred
The allowance method recognizes estimated bad debts in the same period as the related revenue, following the matching principle.
Question 6: When recording a purchase on account, the bookkeeper debits Purchases (or Inventory) and credits:
- Cash
- Accounts Receivable
- Accounts Payable (Correct answer)
- Notes Payable
Correct answer: Accounts Payable
Buying on account creates an obligation to pay the supplier, so Accounts Payable—a liability—is credited.
CB CB Accounts Receivable and Payable Management 1
Which ledger records amounts owed TO your business by customers?