Unit 2 AOS2

Question 1

Accounts Payable

Answer 1

A subsidiary Accounting record that records each individual transaction with each individual Account Payable and shows the balance owing to that Account Payable at any point in time.

Question 2

Accounts Payable schedule

Answer 2

A listing of the name and balance of each Accounts Payable records.

Question 3

Settlement discount

Answer 3

A reduction in the amount paid by a credit
customer in return for an early repayment.

Question 4

Discount revenue

Answer 4

A revenue in the form of a decrease in liabilities and an increase in owner’s equity, earned when Accounts Payable and paid early and a settlement discount is given by the supplier.

Question 5

Settlement of Account

Answer 5

A statement provided to credit customers to given details of transactions that have occurred over a specific period of time and the resulting balance owing at the end of that period.

Question 6

Benefits of using subsidiary records

Answer 6

-Detection of errors
-Ease of reporting
-Management of Accounts Payable

Question 7

Accounts Receivable record

Answer 7

A subsidiary Accounting record that records each individual transaction with each individual Account Receivable and shows the balance owed by that Account Receivable at any point in time.

Question 8

Discount expense

Answer 8

An expense in the form of a decrease in assets (as this is a reduction in the potential inflow of an economic resource in the form of the amount paid in cash by a Accounts Receivable) and a decrease in owner’s equity, which is not drawings.

Question 9

Bad debts

Answer 9

An expense incurred when a debt is written off because it is deemed to be not get back.

Question 10

Income statement

Answer 10

An Accounting report that details the revenue earned and expenses incurred during the reporting period.

Question 11

Strategies for managing Accounts Payable

Answer 11

Access to credit makes it vital that Accounts Payable are managed effectively and strategies to ensure this occurs include:

1. Develop a strong relationship with each supplier to access good prices, better credit terms and good quality of inventory.
2. Pay within, but as close as possible to the credit terms.
3. Pay early to earn a discount (i.e. discount revenue).
4. Appoint an Accounts Payable Officer / Clerk
5. Communicate in a timely fashion

Question 12

Strategies for managing Accounts Receivable

Answer 12

• Offer a discount for quick settlement • Send invoices promptly
• Conduct extensive credit checks
• Send reminder notices
• Threaten legal action
• Employ a debt collection agency
• Deny access to credit facilities
• Appoint an Accounts Receivable Officer / Clerk