Short Questions and Answers- Receivables
The concept of Receivables are very important in Accounting. For any company that sells goods or services on credit, the management of receivables is a very important activity.
Today we’ll learn “35 Short Questions and Answers-Receivables.” If you read it with a proper concentration from top to bottom, you’ll get a basic idea of the receivables. It will also increase your knowledge of accounting and help you perform well on any competitive exam.
For details you may read these articles: What are the receivables in Accounting?
Question-01: What are the receivables?
Answer: When a person or organization recognizes the amount of money due from another person or organization for the sale of goods or services on credit or for other reasons, it is called receivables.
Question-02: How many types of Receivables are there?
Answer: There are three types of receivables, which are Accounts Receivable, Notes Receivable, and Other Receivables.
Question-03: What are accounts receivable?
Answer: Accounts receivable are amounts customers owe on account. They are the result of selling the goods and services.
Question-04: What are Notes receivable?
Answer: Notes Receivable are written commitment for receivable amounts.
Question-05: What does the honor of the Notes Receivable mean?
Answer: If, at maturity, the written value of the notes is paid along with interest, then it is considered as the honor of the notes receivable.
Question-06: What does the dishonor of the Notes Receivable mean?
Answer: Failure to pay the refund at maturity is considered the dishonor of the Receivable Notes.
Question-07: What are the other Receivables?
Answer: Receivables generated outside trade receivables are other receivables.
Question-08: What are the examples of Other Receivables?
Answer: Interest Receivable, loans to company officers, advances to employees, Income taxes refundable.
Question-09: What is the main source of receivables?
Answer: Credit Sales of goods and services.
Question-10: What is the Aging of accounts receivable?
Answer: The aging of accounts receivables is the analysis of customer balances by the length of time they have been unpaid.
Question-11: What is the Accounts receivable turnover?
Answer: The Accounts receivable turnover is a measurement of the liquidity of accounts receivable.
The formula of Accounts receivable turnover=Net credit sales / Average net accounts receivable.
Question-12: What is the Average collection period?
Answer: The average collection period is the average amount of time that a receivable is outstanding.
The formula of the Average collection period = 365 days/accounts receivable turnover.
Question-13: What is the meaning of 1/10, n/30?
Answer: 1% discount if paid within 10 days.
Question-14: Who’s the factor?
Answer: The factor is a financial company or bank that purchases receivables from businesses and then collects payments directly from customers.
Question-15: Who is the Payee?
Answer: The party to whom payment of a promissory note is to be made.
Question-16: What’s the Promissory Note?
Answer: A written promise to pay a specified amount of money on demand or at a fixed time.
Question-17: What is bad debt expense?
Answer: While all necessary steps are taken to recover any debts from the receivable accounts or the debtor, if debtors fail to pay the debt due to financial loss or bankruptcy, it is considered a bad debt expense.
Question-18: What is Allowance for Doubtful Accounts?
Answer: Allowance for Doubtful Accounts is just advance measures against future potential losses of the business.
Question-19: What are the causes of bad debt expense?
Answer: Debtor’s financial deprivation, Bankruptcy, and death.
Question-20: How many methods are used in accounting for uncollectible accounts, and what are they?
Answer: The accounting for uncollectible accounts uses two methods. Which are
- The direct write-off method and
- The allowance method.
Question-21: What is the direct write-off method of accounting for bad debt?
Answer: In the direct write-off method, when an organization determines that a particular account is uncollectible, it charges the loss to Bad Debt Expense.
Question-22: What is the Bad Debt Allowance Method?
Answer: The accounting for bad debts allowance method involves estimating uncollectible accounts at the end of each period.
Question-23: How many bases are used to estimate the allowance, and what are they?
Answer: Two bases are used to estimate the allowance: (1) percentage of sales and (2) percentage of receivables.
Question-24: Which method of accounting for bad debt is not acceptable for financial reporting purposes?
Answer: The Direct write-off method.
Question-25: Where is the bad debt expense shown in the financial statements?
Answer: In the income statement as operating costs.
Question-26: How is the new bad debt expense shown in the balance sheet?
Answer: New bad debt expense is shown in the balance sheet to be deducted from the accounts receivable.
Question-27: Why is the cash discount given against accounts receivable?
Answer: To encourage quick payments.
Question-28: What is the purpose of determining bad debt expense and doubtful debt reserve?
Answer: Determine the exact amount due and keeping the capital intact.
Question-29: What are the synonyms of accounts receivable?
Answer: Book loans, miscellaneous debtors, and sales ledgers balance.
Question-30: How do you report the receivables in the financial statements?
Answer: As of current assets.
Question-31: What are the reserves?
Answer: Reserves are part of the undistributed profit of the business.
Question-32: What is the debtor discount allowance?
Answer: The allowance that is created to compensate for the debts owed to various debtors is called the debtor discount allowance.
Question-33: How is the debtor discount allowance calculated?
Answer: After deducting the bad debt expenses and the new allowance for doubtful debt from the debtor, the debtor discount allowance calculated on what remains.
Question-34: How is the debtor discount allowance shown in the financial statements?
Answer: The debtor discount allowance shall be shown as operating expenses in the statement of income and shall be shown as being deducted from the account receivable in the balance sheet.
Question-35: What is the Day of Grace?
Answer: In England, when the “transferable instruments Act” was introduced, the payment of debts for the sale of goods was made three or more days after maturity, and that extra time was called the Day of Grace.
I hope you have a basic idea about the receivables at the end of the article. Read these “35 Short Questions and Answers – Receivables” on a regular basis and enhance your accounting skills.
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