Accounts Payable & Receivable Advanced Flashcards
6 cards from real AAT L3 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Accounts Payable & Receivable Advanced flashcards as text
When reconciling the purchase ledger control account to the list of supplier balances, a difference may arise from:
Answer: Posting an invoice to the correct supplier account but with the wrong amount
Errors such as posting an invoice at the wrong amount, omitting a transaction from either the control account or a supplier's individual account, or transposition errors will cause the PLCA balance to differ from the sum of supplier balances.
Invoice discounting differs from factoring in that:
Answer: The business retains control of credit collection under invoice discounting (confidential)
With invoice discounting, the business borrows against its receivables but continues to manage credit control itself (customers are unaware of the arrangement). With factoring, the factor takes over collection and customers are notified.
Which of the following would reduce the balance on the purchase ledger control account?
Answer: Purchase returns to suppliers
Purchase returns reduce the amount owed to suppliers — they are credited to the individual supplier account and debited to purchase returns, reducing the PLCA balance.
The cash discount available to a customer for payment within 10 days on a £5,000 invoice at 2% is:
Answer: £100
2% of £5,000 = £100. If the customer pays within 10 days, they can deduct £100 from the invoice, paying only £4,900.
Under UK company law, what is the maximum interest rate a creditor can charge on overdue commercial debts under the Late Payment of Commercial Debts (Interest) Act 1998?
Answer: Bank of England base rate plus 8%
The Late Payment of Commercial Debts Act 1998 entitles creditors to charge statutory interest at 8% above the Bank of England base rate on overdue business-to-business debts where no contract rate is specified.
Which of the following is a key internal control in accounts receivable?
Answer: Segregation of duties between invoicing, cash receipts, and ledger update functions
Segregation of duties prevents fraud and error by ensuring no single person controls all stages of a transaction — in accounts receivable, the person raising invoices should not also receive cash or reconcile the ledger.