Accounts Payable Test Answer

Accounts Payable Test Answer

On December 31, 2007, Deal Inc. failed to accrue the December 2007 sales salaries that were payable on January 6,2008. What will be the effect of the failure to accrue sales salaries on the working capital and cash flows from operating activities in Deal's 2007 financial statements?

Working Capital Cash Flows from Operating Activities
a. Overstated No effect
b. Overstated Overstated
c. No effect Overstated
d. No effect No effect
When clients have customers who are also vendors, what is the best way to offset Accounts Payable against Accounts Receivable?
a. Use the QuickBooks trade-off feature
b. Create a bank account through which you can clear the Payables and the Receivables
c. Use a single journal entry
d. Use multiple journal entries
Making insurance payments in advance is an example of:
a. an accrued receivable transaction.
b. an accrued liability transaction.
c. an unearned revenue transaction.
d. a prepaid expense transaction
How are prepaid expenses typically tracked?
a. In an excel spreadsheet, with a monthly journal entry made to reflect the current month expenses
b. The procedure is fully automated in the accounting system; no one needs to do anything from month to month
c. The CFO will tell the accountant what needs to be booked
d. The auditors of the company do it
Why do companies require deposits & advances?
a. They don't trust the customers to pay
b. It improves cash flow, especially for long duration projects
c. They want to make sure customers have money to pay
At what stage in the Accounts Payable process is cash affected?
a. When an invoice is entered into the accounting system
b. When a credit memo is generated
c. When checks are printed
d. Accounts Payable never handles cash
What is the difference between billable and non-billable expenses?
a. Billable expenses are the expenses incurred by you in carrying out your own business / performing your own duties and responsibilities and Non-billable expenses are the expenses incurred by you on behalf of your customer in performing duties / rendering services and supplying goods
b. Billable expenses are the expenses incurred by you on behalf of your customer in performing duties / rendering services and supplying goodsand Non-billable expenses are the expenses incurred by you in carrying out your own business / duties and performing your own responsibilities.
c. Neither of the above
The correct journal entry to record a purchase of inventory on credit using a perpetual inventory system includes:
a. debit Cost of Goods Sold, credit Inventory
b. debit Accounts Payable, credit Inventory
c. debit Accounts Receivable, credit Sales Revenue
d. debit Inventory, credit Accounts Payable
Who are the parties to a bill of exchange?
a. The drawers & the payees
b. The payees & the owners
c. The drawers, the drawees & the payees
d. The owners & the drawers
A company receives an advance payment for special order goods that are to be manufactured and delivered within 6 months. The advance  payment should be reported in the company's balance sheet as a
a. deferred charge.
b. contra asset account.
c. current liability.
d. non-current liability.
Which form is used to reimburse an individual for Travel and Entertainment expenses?
a. Form W4
b. Expense Voucher
c. Form 1099Misc
d. Form 941
What is the mode of making payment to the employees for reimbursing travel and entertainment expenses?
a. Check
b. Automated Clearing House (ACH)
c. Direct deposit
d. All of the above
Ross & Co. pays all salaried employees on Monday for the 5-day work week ended the previous Friday. The last payroll recorded for the year ended December 31, 2004 was for the week ended December 25, 2004. The payroll for the week ended January 1, 2005 included regular weekly salaries of $80000 and vacation pay of $ 25000 for the vacation time earned in 2004 but not taken by December 31, 2004. Ross had an accrued liability of $20000 for vacation pay as on December 31, 2003. In its December 31, 2004 balance sheet, what amount should Ross report as accrued salary and vacation pay?
a. $64000
b. $69000
c. $84000
d. $89000
Orleans & Co., a cash-basis taxpayer, prepares accrual-basis financial statements. In the current year balance sheet, Orleans's deferred income tax liabilities increased in comparison with those reported for the previous year. Which of the following changes would cause this increase in deferred income tax liabilities?

I.An increase in prepaid insurance premium
II.An increase in rent receivable
III.An increase in warranty obligations
a. I only
b. I and II only
c. II and III only
d. III only
What is the standard method used for the employees to submit an account of the travel expenses incurred by them?
a. They needn't as they are given a company credit card for the purpose
b. They have to submit a written and signed letter stating the total expenses to be reimbursed
c. They submit an envelope containing the receipts of the expenses incurred
d. They have to submit a report of the expenses approved by the employees' supervisor
The ratio derived by dividing Cost of Goods Sold by Account Payable is known as ___________.
a. the Current Ratio
b. the Quick Ratio
c. the Networth Ratio
d. the Accounts Payable Turnover Ratio
Accounts payable refer to the current ___________.
a. income of a business or an organization
b. assets of a business or an organization
c. expenses of a business or an organization
d. liabilities of a business or an organization
What does the acronym EFT stand for?
a. Electronic File Transfer
b. Electronic Funds Transfer
c. Both a and b
d. Electronic Fund Tour
A good example of a typical prepaid expense is:
a. Rent
b. Dividends
c. Insurance
d. Wages
Under the state law, Acme may pay 3% of eligible gross wages or it may reimburse the state directly for actual unemployment claims. The Company believes that actual unemployment claims will be 2% of the eligible gross wages and has chosen to reimburse the state. Eligible gross wages are defined as the first $10000 of the gross wages paid to each employee. The Company had five employees, each of whom earned $20000 during 2007. In its December 31, 2007 balance sheet, what amount should it report as accrued liability for unemployment claims?
a. $1000
b. $1500
c. $2000
d. $3000
How are the A/P journal entries typically created?
a. Hand written by the A/P staff and entered into the system by the accountant
b. The A/P staff is responsible for making journal entries
c. Entries are created and entered by a CPA
d. A/P software will generate journal entries based on preset coding
An Invoice statement is provided ____________
a. for payment purposes
b. to ensure that the IRS department has received all the invoices sent
c. to check for outstanding credits.
d. to know the expenditure of the company for the particular month
Accounts Payable affect net income.
a. True
b. False
How will you track the deposits that clients pay to the vendors?
a. Track deposits as negative balances in Accounts Payable
b. Record the deposit in the Enter Bills window
c. Neither of the above
What should be submitted to the VAT authorities to obtain a refund of VAT?
a. The original invoice, together with an application form and other supporting documents relating to the expenditure incurred must be submitted.
b. The original purchase order together with an application form and other supporting documents relating to the expenditure incurred must be submitted.
c. The original Receipt together with an application form and other supporting documents relating to the expenditure incurred must be submitted
d. Both the original purchase order and the invoice should be submitted
What is the use of an Accounts Payable ledger?
a. An Accounts Payable ledger helps you to control your expenditures and payables
b. An Accounts Payable ledger helps you to know the income earned
c. An Accounts Payable ledger shows the amount to be paid to the employees
d. None of the above
When an employer makes an end-of-period adjusting entry with a debit to the Supplies Expense, the credit entry is made to:
a. Accounts Payable.
b. Supplies.
c. Cash.
d. Retained Earnings.
Why is it important for companies to manage their Accounts Payable?
a. Bills won't be paid otherwise
b. Vendors will call if bills aren't paid immediately
c. Accounts Payable staff needs to be constantly busy or they will become disinterested
d. Extending Accounts Payable keeps cash in the company for a longer period
Barnel Corp. owns and manages 19 apartment complexes. On signing a lease, each tenant has to pay the first and the last month's rent and a $500 refundable security deposit. The security deposits are rarely refunded in total because cleaning costs of $150 per apartment are almost always deducted. About 30% of the time, the tenants are also charged for damages to the apartment, which typically costs $100 to repair. If a one year lease deed is signed on a $900 per month apartment, what amount would the company report as refundable security deposit?
a. $1,400
b. 4500
c. $350
d. $320
How often should Payables be entered in the accounting system?
a. Once a week
b. As soon as the invoices are brought to the AP department
c. Daily
d. As and when they are due
What is Accounts Payable Turnover Ratio?
a. Net profit / Accounts Receivable
b. Cost of Goods Sold / Accounts Payable
c. 365 days / Accounts Payable Turnover
d. Total sales / Networth
In its 2007 income statement, Cere & Co. has reported an income of $300,000 before income taxes. Cere estimated that, because of permanent differences, taxable income for 2007 would be $280,000. During 2007, Cere made estimated tax payments of $50,000, which were debited to income tax expense; Cere is subject to a 30% tax rate. What amount should Cere report as income tax expense?
a. $34,000
b. $50,000
c. $84,000
d. $90,000
Hudson Hotels collects 15 % as city sales tax on room rentals, in addition to $2 per room, per night, as occupancy tax. Sales tax for each month is due at the end of the following month, and occupancy tax are due 15 days after the end of each calendar quarter. On January 3, 2008, Hudson paid its November 2007 sales tax and occupancy tax for the fourth quarter of 2007. Additional information pertaining to Hudson's operations is as follows:
2007 Room Rentals Room Nights
October $100,000 $1,100
November $110,000 $1,200
December $150,000 $1,800

What amounts should Hudson report as sales tax payable and occupancy tax payable in its December 31, 2007 balance sheet?

Sales Tax Occupancy Taxes
a. $39,000 $6,000
b. $39,000 $8,200
c. $54,000 $6,000
d. $54,000 $8,200
Buck & Co. receives deposits from its customers to protect itself against non-payments for future services. These deposits should be classified by the company as
a. a liability
b. revenue
c. a deferred credit deducted from Accounts Receivable.
d. a contra account.
What is VAT?
a. VAT is a tax calculated on the income earned
b. VAT is a consumer-oriented tax imposed on goods and services sold.
c. VAT is an item
d. VAT is a Credit card fee
Companies accrue expenses in order to comply with which accounting principle?
a. Timeliness
b. Matching
c. Conservatism
d. Magnitude
Streamlined Sales Tax is a national effort by which of the following?
a. The State Government
b. The Local Government
c. The private sector to simplify and modernize sales and use tax collection
d. All of the above
What level of detail should invoices contain?
a. Summary, only the total due
b. Totals by item
c. Totals by date
d. Specific details - dates, quantities, individual pricing
Accompanying the bank statement was a credit memorandum for a short-term, non-interest-bearing note collected by the bank. What entry is required in the depositor's accounts?
a. Debit Accounts Receivable: Credit Cash
b. Debit Cash: Credit Notes Receivable
c. Debit Cash: Credit Miscellaneous Income
d. Debit Notes Receivable:Credit Cash
Tax Accounting Services pays off $200 on account. To record this transaction for Tax Accounting Services, the Cash account is credited and the __________ account is debited.
a. Cash
b. Accounts Payable
c. Service Revenue
d. Accounts Receivable
A Trial Balance is a list of all accounts and their ending balances. Place the following accounts in the order they would appear on a properly  prepared Trial Balance: Sales Revenue, Accounts Payable, Land and Rent Expense.
a. Land, Accounts Payable, Sales Revenue, Rent Expense
b. Land, Sales Revenue, Accounts Payable, Rent Expense
c. Land, Accounts Payable, Rent Expense, Sales revenue
d. Account Payable, Land, Rent Expense, Sales Revenue
Which of the following will not result in the recognition of a deferred tax asset?
a. An operating loss carry forward.
b. Immediate expensing of organizational costs.
c. Subscriptions revenue received in advance.
d. Receipt of municipal bond interest.
If a prepaid expense is expiring (the final month is expensed), and the company has not received an invoice for the upcoming prepaid period, the accounting should:
a. Continue to book the monthly expense in the upcoming month and contact the company to find if an invoice will be issued for the coming year
b. Do not book the monthly expense and assume your company is no longer in business with the company
c. Send an email to the CFO
d. Delete the line from Excel and assume no further expense
Using the following information, compute total liabilities.
Notes Receivable $30,000, Accounts Payable $20,000, Wages Payable $8,000 and Rent Expenses $40,000.
a. $20,000
b. $28,000
c. $68,000
d. $98,000
A firm makes all its purchases on credit basis. Cash payment on trade credit is required in the month following the purchase on 70% of all the purchases. The firm takes a 2% cash discount and makes payment for the remaining 30% of all the purchases in the month of purchase.The forecasted purchases for January through April are worth $300,000, $375,000, $450,000, and $300,000 respectively. What will be the total cash disbursement for purchases in the month of March?
a. $132,300
b. $394,800
c. $403,200
d. $450,000
Payments for expenses incurred on corporate cards should be made directly to____________.
a. the EFT
b. the IRS
c. the state Taxes
d. the credit card company
Which of the following methods can be used to value inventory in QuickBooks?
a. Double declining balance
b. Last in, first out (LIFO)
c. First in, first out (FIFO)
d. Average cost
When a deposit is used as payment, what is the journal entry from the customer's (the person who made the deposit) perspective?
a. Debit Cash, credit Service Expense
b. Debit Accounts Payable, credit Cash
c. Debit Service Expense, credit Cash
d. Debit Service Expense, credit Other Advances
Of the following, which is a typical situation involving a deposit?
a. The company uses a recruiting firm to find key employees
b. In order to buy office supplies, the company has  to put a deposit down
c. The business has leased a new location and is required to put a deposit for the last month's rent
d. Federal taxes for the upcoming year
What type of people does the Accounts Payable interface with most often?
a. Customers
b. Vendors
c. Other employees
d. IRS
What is the best way to reimburse Travel and Entertainment to the employees who do not wish to use the electronic form of reimbursement?
a. The reimbursement should be included in the normal paycheck.
b. The reimbursement should be ignored
c. The reimbursement should be made by cash
d. All of the above
Can you collect and remit tax for a state even if not required to do so?
a. No
b. Yes, the State Government will send you the amount without your getting registered with the state prior to collecting the tax.
c. Yes, you can voluntarily register to collect and remit tax. But, you must register with the state prior to collecting the tax.
When are invoices treated as having been paid short?
a. If any discount for early payment is allowed
b. If there are any damaged goods
c. If there are any prior credits
d. All of the above.
An open credit is __________.
a. money owed to the company
b. money owed by the company
c. money owed to the investors
d. None of the above
A bill is a form on which you record details of _________ .
a. the sales made
b. the expenses incurred
c. a purchase made by a vendor to whom the Company owe money
d. the income accrued
When are sales & use taxes due?
a. The date varies from State to State
b. On the15th of every month
c. Annually, on the same date as federal taxes
d. Quarterly, on the 15th of the following month
When an invoice is presented for payment, most companies match it against a purchase order and a receiving document, and if all three match, the invoice is paid on or after its due date. This is referred to as ____________ .
a. the two-way match
b. the three-way match
c. invoice cleared
d. invoice paid
What is the standard sales tax rate used?
a. 7%
b. 3%
c. 10%
d. There is no standard rate; it varies from state to state
What steps are taken before approving an invoice for payment?
a. Validating the invoice once it is matched for checking
b. If workflow is implemented, initiating approval for the invoice
c. Creating accounting after approval of invoice
d. Both a and b
e. a, b, and c
Why are per diem's used in lieu of having employees detail all actual spending for meals?
a. Companys like to treat their employees while they travel for the company
b. Reasonable amounts are fixed and it limits the amount the company will have to spend
c. Employees always lose receipts and that makes the process of reimbursement tough
d. It saves on paperwork
What is Accounts Payable aging report?
a. Sorting of a company's Accounts Payable by the bill date.
b. Sorting of a company's Accounts Payable by the due date.
c. Sorting of a company's Accounts Payable by the posted date.
d. None of the above.
Accounts Payable is _________.
a. a file or an account that contains details of money that a person or company owes to its suppliers.
b. details of money or money's worth that a person or company owns.
c. an expense account
d. a file or an account that contains details of money that a person or company owes to its customers
Who can use a company's Travel & Entertainment Cards, though the liability lies with the employees?
a. Vendors
b. Customers
c. Employees
d. All of the above
Where do you record the payment terms for the money that a client owes to a vendor?
a. In Sales Orders
b. In Checks
c. In Purchase Orders
d. In Bills
What is the report generated to find the net purchases from each vendor regardless of how payments were recorded called?
a. Inventory valuation summary
b. Expenses by vendor summary
c. Unpaid bills details
d. Purchases by vendor summary
Who is to be covered by VAT (Value Added Tax)?
a. All business transactions carried on within a State by individuals
b. All business transactions carried on within a State by partnerships
c. All business transactions carried on within a State by Companies
d. All of the above
Debit memos are required for___________.
a. the payment deductions taken on invoices.
b. the payments made on Purchase Orders
c. the payments received on Sales Orders
d. Both b and c