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Test answers for Accounts Receivable 2016

(75) Last updated: January 27
Elance • Fin. & Mgt.
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75 Answered Test Questions:

1. After goods have been shipped, what must be sent to the buyer?

Answers:

• The invoice

• Cash

• The check

• A letter

2. When computing an average balance of accounts receivable one should use

Answers:

• one day a month

• every day of the year

• one day a year

• two days a year

3. Why are there conflicts between credit and sales?

Answers:

• Because accounting puts pressure on sales to earn more money

• Because the accounts receivable department puts pressure on them

• Because management puts pressure on the credit department to offer more credit

• The function of sales is contingent upon the credit department granting credit to the customer

4. What is an advantage of a seller deciding to offer its goods and services on credit?

Answers:

• Convenience for buyers

• (All of these)

• potential increase in revenues

• Increase efficiency of transactions

5. What is a revolutionary solution to issues in billing accuracy?

Answers:

• Manual billing

• The credit card imprinter

• Billing in person

• Electronic billing

6. Another name for an account receivable is

Answers:

• a trade payment

• a trade receivable

• a cash payment

• a trade payable

7. True or False? Aging is often broken up into several categories such as current, 1-30 days past due, 31-60 days past due etc.

Answers:

• True

• False

8. What is bankruptcy?

Answers:

• Bankruptcy occurs when a business, person, or legal entity has paid its debts owed to its creditors

• Bankruptcy occurs when a business, person, or legal entity has reached its maximum earning potential

• Bankruptcy occurs when a business, person, or legal entity cannot pay dividends

• Bankruptcy occurs when a business, person, or legal entity cannot repay debts owed to its creditors

9. True or False? Sometimes a company will provide a cash discount in order to incentivize a customer to pay in a timely fashion.

Answers:

• False

• True

10. True or False? Invoices are typically used by the business and deliviered to the customer for an agreed payment time.

Answers:

• True

• False

11. True or False? A debtor can pay before its due date.

Answers:

• True

• False

12. True or False? The account payable for one company corresponds to another company's account receivable.

Answers:

• False

• True

13. True or False? With the help of aging one can usually detemine uncollectable accounts receivable.

Answers:

• False

• True

14. Which of the following is a good rule to follow in accounts receivable?

Answers:

• Send all invoices to accounts payable

• Print and mail invoices as quickly as possible; the sooner an invoice is sent, the sooner you get paid

• Let management handle all invoices

• Process invoices at the end of the first quarter

15. A subsidiary ledger for accounts receivable has the information on which of the following

Answers:

• returns of goods

• discounts

• credit sales to clients

• (All of these)

16. An example of nontrade receivables are

Answers:

• insurance clams owed

• tax refund owed

• employee loans owed

• (All of these)

17. What is the defintion of accounts receivable?

Answers:

• The money from a business that it owes and is shown on the balance sheet as a liability.

• (None of these)

• A claim of payment for a business for services it had done for a particular customer or client

18. What is another term for a supplier?

Answers:

• Vendor

• Distributor

• Client

19. What do terms of an invoice suggest?

Answers:

• They indicate the satisfaction level of the seller

• Quality of a product purchased

• They indicate the amount of discounts the buyer can receive on the next bill

• Invoice terms indicate when the bill is to be paid

20. Which are examples of document tools that are valuable to accounts receivable?

Answers:

• Electronic data interchange, and optical character recognition

• Televisions and radios

• Pagers and cell phones

• The Internet and overhead projectors

21. What is an example of a modern software that handles accounts payable?

Answers:

• CashBooks

• APcash

• Quickbooks

• PayInvoice

22. What must a debtor file in a voluntary bankruptcy?

Answers:

• A subpoena

• Finra registration

• A petition for liquidation

• Articles of incorporation

23. A common payment term for accounts receivable is:

Answers:

• 30 days

• 60 days

• 1 year

• 6 months

24. How should a collections fax be addressed to be used to its greatest advantage?

Answers:

• They should be addressed to the government

• They should be addressed to the CEO

• They should be addressed to the appropriate party

• They should have no address to maintain privacy

25. True or False? A secured creditor is someone who that has a legal right to the company's assets.

Answers:

• True

• False

26. What does GAAP stand for?

Answers:

• Generally Accepted Accounting Principles

• Generally Accepted Accounting Practices

• Generally Acheivable Accounting Practices

• Generally Acheivable Accounting Principles

27. In order to secure you a line of credit, you could use accounts receivable as _______.

Answers:

• account payables

• cash payment

• collateral

28. What is the last resort when it comes to collections?

Answers:

• Reporting the company to the IRS

• Calling the authorities

• Use a third-party billing agency who may charge a percentage of the total recovered

• Hiring a company like KPMG to settle the account

29. The title of a good transfers to the buyer at the shipping point. This is likely an example of a/an _____ shipping point.

Answers:

• FOB

• same day

• AMP

• SCA

• SEC

30. When you have converted valuable financial data to an authorized, unreadable state, what has happened to it?

Answers:

• It has been compressed

• It has been decrypted

• It has been encrypted

• It has been read

31. What terms do sellers prefer to sell to customers?

Answers:

• Cash-in-advance, or CIA

• They prefer to sell to customers with poor credit

• On credit

• They prefer to sell to customers with no cash and bad credit

32. What is one downside to electronic billing?

Answers:

• The reduction in paper waste

• The increase in personnel to run the system

• The speed of processing

• The setup cost

33. Which of the following is an example of an accounts receivable?

Answers:

• (All of these)

• a non trade receivable

• a trade receivable

34. Sometimes when an account receivable is not paid a business can turn to

Answers:

• a collection attorney

• a collection agency

• (All of these)

35. True or False? Net sale on a shipment of goods is the total amount of goods sold minus the non-acceptable goods sold to a customer

Answers:

• True

• False

36. What does ???DSO??? stand for, and how is it calculated?

Answers:

• Day sales outstanding. Net income / (Annual net sales / 365)

• Day sales outstanding. Gross payables / (Annual net sales / 2000)

• Day sales outstanding. Gross receivables / (Annual net sales / 12)

• Day sales outstanding. Gross receivables / (Annual net sales / 365)

37. Why is the allowance method used over the direct write off method when dealing with uncollectible accounts receivable?

Answers:

• (None of these)

• The accounts receivable will be decreased on the balance sheet using allowance for doubful accounts

• The accounts receivable will be increased on the balance sheet using allowance for doubful accounts

38. How often is a bad debt expense closed?

Answers:

• 60 days

• 30 days

• 1 year

• no time frame

39. Who is the best contact for receiving information about legal issues and credit?

Answers:

• FDIC

• National Association of Credit Management

• FINRA

• IRS

40. Account receivables are categorized as current assets assuming they are due within

Answers:

• 1 year

• 30 days

• 6 months

• 15 days

41. True or False? A higher accounts receivable turnover ratio is generally favorable.

Answers:

• True

• False

42. Which of the following are two common bookkeeping methods?

Answers:

• the allowance method and direct write-off method

• the income method and direct write-off method

• the allowance method and indirect write-off method

43. An account receivable turnover ratio is 5, while the company sales were $100,000. What is average balance of accounts receivable?

Answers:

• $20000

• (None of these)

• $200000

• $500000

44. What can happen if a company fails to read an invoice?

Answers:

• Vendors may introduce clauses that companies cannot agree to

• Vendors may sue the company

• All invoices are electronic and can't be changed in any way

• Nothing happens because all invoices are standard

45. Why is it central to the life of a business that sales and credit departments work together?

Answers:

• It's not. It's better for credit and sales to compete.

• Selling an item to the right party at the right price is a team effort

• It makes the processing of electronic payments faster

• It becomes easier for customers to get credit to buy more items

46. What three important documents, and following material, are critical in a financial statement for credit evaluation?

Answers:

• Income report, banking sheet, cash flow statement, and anecdotes

• Income statement, balance sheet, cash flow statement, and footnotes

• Bank statement, balance sheet, cash flow statement, and 10K

• Credit statement, balance sheet, accounting statement, and notes

47. What function do letters of credit serve?

Answers:

• They are documents expressing a buyer's need to be granted credit

• They are documents stating the buyers intent to pay the seller

• They are documents from the credit card company urging payment of late charges

• They are documents stating the sellers intent to default on payment

48. The benefit of a vague invoice is what?

Answers:

• A vague invoice means that terms are not conditional.

• There is no benefit. Vague invoices cause internal billing problems.

• A vague invoice is easier to comprehend.

• Vague invoices give a company extra time to pay a bill because their recipient is struggling to understand it.

49. When a customer has no credit history, what is a possible option to make a sale?

Answers:

• Credit option

• Security interest

• Credit interest

• There is no option

50. What type of customers are letters of credit most useful for?

Answers:

• Preferred customers

• Local customers

• International

• National customers

51. Which method is required by the GAAP?

Answers:

• Allowance method

• (None of these)

• Indirect write-off method

• Direct write-off method

52. Compute the accounts receivable collection period if a company had $400,000 net credit sales and its accounts receivable balance was $30,000.

Answers:

• $30,000/365

• $30,000*365/$400,000

• $400,000*365/$30,000

• $400,000/365

53. Compute the accounts receivable collection period if a company had $500,000 net credit sales and its accounts receivable balance was $40,000.

Answers:

• $40,000/365

• $40,000*365/$500,000

• $500,000/365

• $500,000*365/$40,000

54. What are two examples of documents to carry when visiting a customer for a collection?

Answers:

• A statement of the customer's account, and documentation of all disputes

• The customer's balance sheet and statement of cash flows

• The customer's credit report and income statement

• The customer's invoice and a copy of their receipt

55. Chapter 7 bankruptcy entails what activity?

Answers:

• Hostile takeovers

• The liquidation of a business

• Leveraged buyouts

• The insolvency of a business

56. A supplier is an unsecured creditor when

Answers:

• (None of these)

• a supplier provides good or services to a company through debit.

• a supplier buys goods or services to a company through credit.

• a supplier provides goods or services to a company through credit.

57. Company X has sales of $5,000,000 and its average balance for accounts receivable was $50,000. What is the accounts receivable turnover ratio?

Answers:

• 10

• 100

• 50

• 1

58. What is an excellent two-pronged approach to collections?

Answers:

• Contact via fax and never contact them again

• Contact via telephone, and document everything

• Contact via personal letter and document everything

• Contact via email and make a random personal visit

59. What is the standard calculation for accounts receivable turnover?

Answers:

• (Net Credit Sales) / (Average Accounts Receivable)

• (Net Credit Sales) / (Total Accounts Receivable)

• (Average Accounts Receivable) / (Average Accounts Payable)

• (Net Cash Sales) / (Average Accounts Receivable)

• (Inventory Turnover) / (Average Accounts Receivable)

60. What data standard is competing with EDI, and what does it mean?

Answers:

• XLS, excel language script

• PHP, personal hyper paper

• PDF, public document format

• XML, eXtensible MarkUp Language

61. How should sales staff be measured to assure their performance is high?

Answers:

• They should be measured based on customer satisfaction

• They should be measured based on attendance

• Measure them based on their return on assets

• They should be measured based on their compatibility with the company

62. When looking at a company's accounting records, obtaining the accounts receivable will

Answers:

• sometimes affect the net income

• will not affect the net income

• always affect the net income

63. True or False? A postdated check can be deposited and is considered money.

Answers:

• True

• False

64. What is chapter 11 bankruptcy?

Answers:

• Chapter 11 bankruptcy is a reorganization of a business that allows it to continue operation.

• Chapter 11 bankruptcy is a liquidation of a business that causes it to cease operation.

• Chapter 11 bankruptcy is the merging of businesses that causes them to continue operation.

• Chapter 11 bankruptcy is the competition of businesses that causes them to earn more profit.

65. What is the purpose of antitrust laws?

Answers:

• Antitrust laws prevent check floating

• Antitrust laws prevent price-fixing

• Antitrust laws prevent embezzlement

• Antitrust laws prevent fraud

66. What is the ISO standard for financial services messaging?

Answers:

• ISO 20022

• ISO2000

• ISO9000

• SIO2022

67. There are two tests for insolvency. What are they?

Answers:

• The bankruptcy test and the equity test

• The liquidation test and the cash flow test

• The balance Sheet Test, and the Equity Test

• The insolvency test and the valuation test

68. There are two tests for insolvency. What are they?

Answers:

• The bankruptcy test and the equity test

• The liquidation test and the cash flow test

• The balance Sheet Test, and the Equity Test

• The insolvency test and the valuation test

69. How do you calculate the days' sales in accounts receivable?

Answers:

• Divide the accounts receivable turnover ratio by the number of days in a calendar year

• Multiply the number of days in a calendar year by the accounts receivable turnover ratio

• Divide the number of days in a calendar year by the accounts receivable turnover ratio

• Subtract the accounts receivable turnover ratio by the number of days in a calendar year

70. You have a customer whose financials are deteriorating and credit limit is likely to be reduced. What is the best course of action?

Answers:

• An unscheduled customer visit

• Legal intervention

• A scheduled customer visit

• A visit to a collection agency

71. True or False? Signing a contract always creates a liabiity or asset.

Answers:

• True

• False

72. True or False? According to the IRS, bad debts can always be used as an allowable deduction when computing profits for a company.

Answers:

• True

• False

73. What might a company do to increase their float if they are deceitful?

Answers:

• Write false checks

• Mail payment to the wrong company

• Mail payment to the wrong part of a company

• Forge checks

74. If a company is to be audited for credit approval, what three statements must be provided?

Answers:

• Balance sheet, statement of retained earnings, annual report

• Audited statements, reviewed statements, compiled statements

• Audited statements, income statements, credit statements

• Business statements, reviewed statements, settled statements

75. Who is chapter 12 bankruptcy intended for?

Answers:

• Family farmers or fisherman

• Hoteliers and fisherman

• Family farmers and restaurant owners

• Small businesses