Accounts Receivable

What is the primary function of accounts receivable in a business?

• To track money owed to the business by customers

• To manage employee salaries

• To calculate business taxes

• To handle inventory management

Which of the following best describes accounts receivable?

• A liability account

• An asset account

• An expense account

• An equity account

How does accounts receivable impact a company's cash flow?

• It increases cash flow immediately

• It decreases cash flow until collected

• It has no impact on cash flow

• It permanently reduces cash flow

What is the typical time frame for collecting accounts receivable?

• 30 to 90 days

• 1 to 2 years

• 6 months to 1 year

• Over 1 year

Which document is primarily used to record accounts receivable?

• Invoice

• Receipt

• Purchase order

• Balance sheet

What is the risk associated with accounts receivable?

• Credit risk

• Market risk

• Operational risk

• Liquidity risk

How can a company reduce the risk of uncollectible accounts receivable?

• By offering discounts for early payment

• By increasing product prices

• By extending credit terms

• By reducing marketing expenses

What is the term for accounts receivable that cannot be collected?

• Bad debt

• Goodwill

• Deferred revenue

• Accrued expense

Which financial statement includes accounts receivable?

• Balance sheet

• Income statement

• Cash flow statement

• Statement of retained earnings

What is the effect of writing off an uncollectible account on accounts receivable?

• Decreases accounts receivable

• Increases accounts receivable

• Has no effect on accounts receivable

• Transfers to accounts payable