Recording, Reporting and Management of Accounts Receivable

With each credit sale on account, a business takes the risk that the customer will never pay the amount owed.

• True

• False

Some businesses refer to uncollectable debts or Accounts Receivable that can't pay what they owe as __.

• Cliff hanger

• Bad debts

• A menace to society!

• Johnny bad

What is the effect on Owner's Equity in the Accounting equation when a bad debt can't be collected or needs to be written off?

• Accounts Receivable Increases

• Owner's Equity Decreases

• Accounts Payable Decreases by the same amount

• Accounts Payable gets Decreased in the extreme.

The source document for a return of Inventory is __?.

• Memorandum

• Receipt

• Credit Note

• There isn't a source document

When an account becomes uncollectable and is determined to be a bad debt it must be written off where ......

• The Bad Debt Expense should be forgotten as quickly as possible

• Assets Decrease

  Liabilities Decrease

  Owner's Equity Decrease

• Assets Decrease

  Liabilities Increase

  Owner's Equity Decrease

• Accounts Receivable Increase

  Liabilities Increase

  Owner's Equity Increase

A credit sale is _______?

• Cash paid in advance for Inventory

• A loan from the bank to purchase Non-Current Assets

• A transfer of Inventory that will be paid for at a later date.

• Inventory that will be received at a date later than when purchased

Which Accounting Assumption explains why credit sales are recognised as Revenue?

• Relevance

• Faithful Representation

• Entity

• Accrual Basis

An invoice will show the cost price of the inventory

• False

• True

Cost price of a credit sale is determined by _______

• Knowing the mark-up applied

• Checking the OUT column of the inventory card

• Checking the purchase invoice for the inventory

• All of these are correct

What is the effect on the Accounting Equation when a credit sale is made?

• Assets - Decrease

  Liabilities - Decrease

  Owner's Equity -Decrease

• Assets - Increase

  Liabilities - Decrease

  Owner's Equity - Increase

• Assets - Increase

  Liabilities - Increase

  Owner's Equity - Increases

• Assets - Decrease

  Liabilities - Increase

  Owner's Equity - Increase