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Exam 6: Cash and Accounts

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Question 41

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Which of the following statements is correct in regards to the recovery entry of a specific accounts receivable?

A) It does not affect the statement of financial position.
B) It affects both the statement of income and the statement of financial position.
C) It only affects the statement of income.
D) It only affects the statement of financial position.

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Question 42

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Describe the how accounts receivable is valued.

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Accounts receivable are reflected on the...

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Question 43

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If bad debt expense is over or underestimated in a prior period, an adjustment will be made to the allowance for doubtful accounts this period.

Selling on account reduces overall sales.

The direct writeoff method requires two journal entries when an account is written off.

To adjust the cash account to the correct amount, the accountant needs to make journal entries for all the adjustments on the G/L side of the bank reconciliation.

The longer a receivable goes without being collected, the less likely it will become uncollectible.

The entry to provide for uncollectible accounts under the allowance method affects both the statement of income and the statement of financial position by

Which of the two methods of accounting for uncollectible accounts, the allowance method or the direct writeoff method, is most acceptable? Why?

A recovery of an account will decrease the Cash account and increase the Accounts Receivable account.

A client who is an owner/operator of a small convenience store has come to you for advice on how to prepare a bank reconciliation. She has read somewhere that there are definite benefits to preparing a bank reconciliation every month, but she is not sure how doing so will help her. Instructions Provide your client with a summary of how to prepare a bank reconciliation. Explain how preparing monthly bank reconciliations can provide important control procedures for her business.

When the bad debt estimate is based on the assumption that the amount of bad debt is a function of the total sales made on credit, this method is known as

Writing cheques instead of using cash would be a proper internal control procedure.

No allowance for doubtful accounts is used for the

Analyzing the accounts receivable turnover is important in assessing the short-term liquidity of an organization.

Identify and describe the three methods a company can use to shorten its cash-to-cash cycle, and explain why this is important.

All of the following are features of the aging of accounts receivable method except

The individual account details for each of a company's customers is managed in the

Bad Debt Expense is a permanent account.

Explain the concept of liquidity and how it is measured.