CAP Accounts Payable and Receivable Flashcards
6 cards from real CAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CAP Accounts Payable and Receivable flashcards as text
Which internal control best prevents duplicate vendor payments in accounts payable?
Answer: Stamping invoices 'PAID' immediately upon payment
Marking invoices 'PAID' immediately after payment prevents the same invoice from being submitted and paid a second time.
What does Days Sales Outstanding (DSO) measure in accounts receivable management?
Answer: The average number of days to collect payment from customers
DSO measures the average number of days it takes a company to collect payment after a sale is made, indicating collection efficiency.
Under GAAP, which basis is required for recognizing accounts receivable?
Answer: Accrual basis
GAAP requires accrual basis accounting, so accounts receivable are recognized when earned, regardless of when cash is collected.
A vendor issues a credit memo to a buyer most commonly because:
Answer: Goods were returned or an overcharge occurred
A credit memo from the vendor reduces the amount the buyer owes, typically due to returned merchandise or a billing error.
Which ratio indicates how many days on average a company takes to pay its suppliers?
Answer: Days Payable Outstanding
Days Payable Outstanding (DPO) = (Average Accounts Payable / Cost of Goods Sold) × 365, showing average days to pay suppliers.
What is the correct journal entry when a customer pays their outstanding invoice of $1,000?
Answer: Debit Cash $1,000; Credit Accounts Receivable $1,000
Receiving payment on a receivable increases Cash (debit) and decreases Accounts Receivable (credit) since the obligation has been settled.