COA Invoice Processing & Accounts Payable — Questions and Answers
Question 1: What is the primary purpose of a purchase order (PO) in the accounts payable process?
- It confirms that payment has already been sent to the vendor
- It serves as a receipt acknowledging goods have been received
- It is a formal document authorizing a purchase and establishing agreed-upon terms before goods are received (Correct answer)
- It is a request from the vendor to be added to the approved vendor list
Correct answer: It is a formal document authorizing a purchase and establishing agreed-upon terms before goods are received
A purchase order is issued by the buyer BEFORE receiving goods or services. It formally authorizes the purchase, specifies items, quantities, and agreed prices, and creates a binding procurement record.
Question 2: In a 'three-way match' process, which three documents are compared before an invoice is approved for payment?
- Invoice, bank statement, and vendor contract
- Budget report, purchase order, and payment check
- Purchase order, receiving report, and vendor invoice (Correct answer)
- Invoice, payment receipt, and vendor master file
Correct answer: Purchase order, receiving report, and vendor invoice
A three-way match compares: (1) the purchase order (what was authorized to buy), (2) the receiving report (what was actually delivered), and (3) the vendor invoice (what is being billed). All three must align before payment is released.
Question 3: Invoice payment terms stated as 'Net 30' mean:
- A 30% discount is applied if payment is made within 10 days
- Full payment is due within 30 days of the invoice date (Correct answer)
- Payment must be made 30 days before delivery of goods
- A late penalty of 30% applies after the due date
Correct answer: Full payment is due within 30 days of the invoice date
'Net 30' is a standard payment term indicating the full invoice amount is due within 30 calendar days from the invoice date. 'Net' refers to the total amount owed with no discount applied.
Question 4: An office administrator notices the amount on a vendor invoice does not match the corresponding purchase order. What is the correct next step?
- Pay the invoice amount as received to preserve the vendor relationship
- Approve payment for the purchase order amount and write off the difference
- Discard the invoice and ask the vendor to resubmit without reviewing further
- Place the payment on hold and contact the vendor to resolve the discrepancy (Correct answer)
Correct answer: Place the payment on hold and contact the vendor to resolve the discrepancy
Payment controls require all documents to match before funds are released. A discrepancy must be investigated and resolved with the vendor to prevent overpayment, unauthorized charges, or accounting errors.
Question 5: Which of the following BEST describes 'accounts payable' (AP)?
- Money owed to the company by its customers for goods or services sold on credit
- Money the company owes to vendors and suppliers for purchases received but not yet paid (Correct answer)
- Employee wages and salaries owed for the current pay period
- Long-term debt owed to financial institutions
Correct answer: Money the company owes to vendors and suppliers for purchases received but not yet paid
Accounts payable represents the company's short-term obligations to vendors and suppliers for goods or services already received but not yet paid. It appears as a liability on the balance sheet.
Question 6: What is the primary purpose of maintaining a vendor master file in an accounts payable system?
- To store copies of all outgoing payment checks
- To track employee expense reimbursement requests
- To maintain accurate, verified vendor information (name, address, banking details, tax ID) used in payment processing (Correct answer)
- To record monthly credit card statements from the company's bank
Correct answer: To maintain accurate, verified vendor information (name, address, banking details, tax ID) used in payment processing
The vendor master file is a centralized database of verified vendor information that ensures payments are sent to the correct party, prevents duplicate payments, and supports tax compliance (e.g., issuing 1099s).
COA Invoice Processing & Accounts Payable
What is the primary purpose of a purchase order (PO) in the accounts payable process?