CCM Trade Credit & Accounts Receivable Flashcards
6 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CCM Trade Credit & Accounts Receivable flashcards as text
What does 'days sales outstanding' (DSO) measure?
Answer: The average number of days it takes to collect payment after a sale
DSO calculates the average collection period for receivables, reflecting how efficiently the company converts sales to cash.
A Best Possible DSO (BPDSO) calculation is used to:
Answer: Measure the theoretical minimum DSO if all customers paid exactly on time
BPDSO represents the DSO achievable if every invoice were paid exactly on its due date, serving as a benchmark for efficiency.
Which of the following would INCREASE a company's DSO?
Answer: A rise in past-due receivables relative to sales
Rising past-due balances inflate the receivables balance relative to daily sales, which increases DSO.
A cash application process in accounts receivable is responsible for:
Answer: Matching customer payments to open invoices accurately and timely
Cash application posts incoming payments to the correct invoices, keeping the AR ledger accurate for collections and reporting.
A credit manager is evaluating a potential bad debt reserve. This reserve is BEST described as:
Answer: An accounting estimate of receivables that will likely not be collected
A bad debt reserve (allowance for doubtful accounts) is an estimated contra-asset account matching expected uncollectible receivables against revenue.
Which of the following is a common method for calculating the allowance for doubtful accounts?
Answer: Percentage of sales method or aging of receivables method
The percentage of sales method and the aging of receivables method are the two standard approaches for estimating uncollectible amounts under GAAP.