Accounting Exam 2: Questions With
Correct Answers 2025
Measurement (during the year): DuringAthe year, a company provides services to customers on account
and expects to receive cash in the future. The company records these services on account to which of t
he following accounts?
a. Cash.
b. Accounts Receivable.
c. Allowance for Uncollectible Accounts.
d. Services on account are not recorded until the cash is collected. - CORRECT ANSWER -b
Measurement (end of the year): At the end of the year, an adjusting entry is recorded to estimate futur
e uncollectible accounts. The adjusting entry involves:
a. Debit Bad Debt Expense; credit Allowance for Uncollectible Accounts.
b. Debit Bad Debt Expense; credit Accounts Receivable.
c. Debit Service Revenue; credit Accounts Receivable.
d. Debit Allowance for Uncollectible Accounts; credit Accounts Receivable. - CORRECT ANSWER -a
Communication (income statement): The balance of Bad Debt Expense from estimating future uncollect
ible accounts has what effect on the income statement in the current year?
A. Increases net income.
B. Decreases net income.
C. No effect. - CORRECT ANSWER -b
Communication (balance sheet): Which of the following is reported in the balance sheet as a contra (or
negative) asset account equal to the amount of estimated future uncollectible accounts?
A. Bad Debt Expense.
B. Accounts Receivable.
C. Allowance for Uncollectible Accounts.
D. Service Revenue. - CORRECT ANSWER -c
,Decision UMaking U(ratio Uanalysis): UA Ucompany Uthat Uprovides Ucredit Usales Uor Uservices Uto Ucustomers
Uand Uthe Un Umore Ueffectively Ucollects Ucash Ufrom Uthose Ucredit Ucustomers Uwould Ureport Ua
Ureceivables Uturnover Uratio.
A. Higher.
B. Lower. U- UCORRECT UANSWER U-a
Accounts Ureceivable: U- UCORRECT UANSWER U-
The Uamounts Uowed Uto Uthe Ucompany Uby Uits Ucustomers Ufrom Uthe Usale Uof Ugoods Uor Uservices U on
U account.
Aging Umethod: U- UCORRECT UANSWER U-
Basing Uthe Uestimate Uof Ufuture Ubad Udebts Uon Uthe Uvarious Uages Uof Uindividual Uaccounts Ureceivable,
Uusing Ua Uhi Ugher Upercentage Ufor U"old" Uaccounts Uthan Ufor U"new" Uaccounts.
Allowance Ufor Uuncollectible Uaccounts: U- UCORRECT UANSWER U-
Contra Uasset Uaccount Urepresenting Uthe Uamount Uof Uaccounts Ureceivable Unot Uexpected Uto Ube Ucollected.
Allowance Umethod: U- UCORRECT UANSWER U-
Method Uof Ureporting Uaccounts Ureceivable Ufor Uthe Unet Uamount Uexpected Uto Ube Ucollected.
Average Ucollection Uperiod: U- UCORRECT UANSWER U-
Approximate Unumber Uof Udays Uthe Uaverage Uaccounts Ureceivable Ubalance Uis Uoutstanding. UIt Uequals
U365 Udivi Uded Uby Uthe Ureceivables Uturnover Uratio.
Bad Udebt Uexpense: U- UCORRECT UANSWER U-
The Ucost Uof Uestimated Ufuture Ubad Udebts Uthat Uis Ureported Uas Uan Uexpense Uin Uthe Ucurrent Uyear's Uincome
Ustat Uement.
Contra Urevenue Uaccount: U- UCORRECT UANSWER U-
An Uaccount Uwith Ua Ubalance Uthat Uis Uopposite, Uor U"contra," Uto Uthat Uof Uits Urelated Urevenue Uaccount.
Credit Usales: U- UCORRECT UANSWER U-
Transfer Uof Ugoods Uor Uservices Uto Ua Ucustomer Utoday Uwhile Ubearing Uthe Urisk Uof Ucollecting Upayment
Ufrom Uthat Ucustomer Uin Uthe Ufuture. UAlso Uknown Uas Usales Uon Uaccount Uor Uservices Uon Uaccount
, Direct Uwrite-off Umethod: U- UCORRECT UANSWER U-
Recording Ubad Udebt Uexpense Uat Uthe Utime Uwe Uknow Uthe Uaccount Uis Uactually Uuncollectible.
Invoice: U- UCORRECT UANSWER U-
A Usource Udocument Uthat Uidentifies Uthe Udate Uof Usale, Uthe Ucustomer, Uthe Uspecific Uitems Usold, Uthe
Udollar Uam Uount Uof Uthe Usale, Uand Uthe Upayment Uterms.
Net Uaccounts Ureceivable: U- UCORRECT UANSWER U-
The Udifference Ubetween Utotal Uaccounts Ureceivable Uand Uthe Uallowance Ufor Uuncollectible Uaccounts.
Net URevenue U- UCORRECT UANSWER U-
AAcompany's Utotal Urevenues Uless Uany Udiscounts, Ureturns, Uand Uallowances
Notes Ureceivable: U- UCORRECT UANSWER U-
Formal Ucredit Uarrangements Uevidenced Uby Ua Uwritten Udebt Uinstrument, Uor Unote.
Percentage-of-receivables Umethod: U- UCORRECT UANSWER U-
Method Uof Uestimating Uuncollectible Uaccounts Ubased Uon Uthe Upercentage Uof Uaccounts Ureceivable
Uexpected Unot Uto Ube Ucollected
Receivables Uturnover Uratio: U- UCORRECT UANSWER U-
Number Uof Utimes Uduring Ua Uyear Uthat Uthe Uaverage Uaccounts Ureceivable Ubalance Uis Ucollected U(or
U"turns Uover U"). UIt Uequals Unet Ucredit Usales Udivided Uby Uaverage Uaccounts Ureceivable.
Sales Uallowance: U- UCORRECT UANSWER U-
Seller Ureduces Uthe Ucustomer's Ubalance Uowed Uor Uprovides Uat Uleast Ua Upartial Urefund Ubecause Uof
Usome Udefici Uency Uin Uthe Ucompany's Ugood Uor Uservice
Sales Udiscount: U- UCORRECT UANSWER U-
Reduction Uin Uthe Uamount Uto Ube Ureceived Ufrom Ua Ucredit Ucustomer Uif Ucollection Uon Uaccount Uoccurs
Uwithin Ua Uspecified Uperiod Uof Utime.
Sales Ureturn: U- UCORRECT UANSWER U-Customer Ureturns Ua Uproduct.
Correct Answers 2025
Measurement (during the year): DuringAthe year, a company provides services to customers on account
and expects to receive cash in the future. The company records these services on account to which of t
he following accounts?
a. Cash.
b. Accounts Receivable.
c. Allowance for Uncollectible Accounts.
d. Services on account are not recorded until the cash is collected. - CORRECT ANSWER -b
Measurement (end of the year): At the end of the year, an adjusting entry is recorded to estimate futur
e uncollectible accounts. The adjusting entry involves:
a. Debit Bad Debt Expense; credit Allowance for Uncollectible Accounts.
b. Debit Bad Debt Expense; credit Accounts Receivable.
c. Debit Service Revenue; credit Accounts Receivable.
d. Debit Allowance for Uncollectible Accounts; credit Accounts Receivable. - CORRECT ANSWER -a
Communication (income statement): The balance of Bad Debt Expense from estimating future uncollect
ible accounts has what effect on the income statement in the current year?
A. Increases net income.
B. Decreases net income.
C. No effect. - CORRECT ANSWER -b
Communication (balance sheet): Which of the following is reported in the balance sheet as a contra (or
negative) asset account equal to the amount of estimated future uncollectible accounts?
A. Bad Debt Expense.
B. Accounts Receivable.
C. Allowance for Uncollectible Accounts.
D. Service Revenue. - CORRECT ANSWER -c
,Decision UMaking U(ratio Uanalysis): UA Ucompany Uthat Uprovides Ucredit Usales Uor Uservices Uto Ucustomers
Uand Uthe Un Umore Ueffectively Ucollects Ucash Ufrom Uthose Ucredit Ucustomers Uwould Ureport Ua
Ureceivables Uturnover Uratio.
A. Higher.
B. Lower. U- UCORRECT UANSWER U-a
Accounts Ureceivable: U- UCORRECT UANSWER U-
The Uamounts Uowed Uto Uthe Ucompany Uby Uits Ucustomers Ufrom Uthe Usale Uof Ugoods Uor Uservices U on
U account.
Aging Umethod: U- UCORRECT UANSWER U-
Basing Uthe Uestimate Uof Ufuture Ubad Udebts Uon Uthe Uvarious Uages Uof Uindividual Uaccounts Ureceivable,
Uusing Ua Uhi Ugher Upercentage Ufor U"old" Uaccounts Uthan Ufor U"new" Uaccounts.
Allowance Ufor Uuncollectible Uaccounts: U- UCORRECT UANSWER U-
Contra Uasset Uaccount Urepresenting Uthe Uamount Uof Uaccounts Ureceivable Unot Uexpected Uto Ube Ucollected.
Allowance Umethod: U- UCORRECT UANSWER U-
Method Uof Ureporting Uaccounts Ureceivable Ufor Uthe Unet Uamount Uexpected Uto Ube Ucollected.
Average Ucollection Uperiod: U- UCORRECT UANSWER U-
Approximate Unumber Uof Udays Uthe Uaverage Uaccounts Ureceivable Ubalance Uis Uoutstanding. UIt Uequals
U365 Udivi Uded Uby Uthe Ureceivables Uturnover Uratio.
Bad Udebt Uexpense: U- UCORRECT UANSWER U-
The Ucost Uof Uestimated Ufuture Ubad Udebts Uthat Uis Ureported Uas Uan Uexpense Uin Uthe Ucurrent Uyear's Uincome
Ustat Uement.
Contra Urevenue Uaccount: U- UCORRECT UANSWER U-
An Uaccount Uwith Ua Ubalance Uthat Uis Uopposite, Uor U"contra," Uto Uthat Uof Uits Urelated Urevenue Uaccount.
Credit Usales: U- UCORRECT UANSWER U-
Transfer Uof Ugoods Uor Uservices Uto Ua Ucustomer Utoday Uwhile Ubearing Uthe Urisk Uof Ucollecting Upayment
Ufrom Uthat Ucustomer Uin Uthe Ufuture. UAlso Uknown Uas Usales Uon Uaccount Uor Uservices Uon Uaccount
, Direct Uwrite-off Umethod: U- UCORRECT UANSWER U-
Recording Ubad Udebt Uexpense Uat Uthe Utime Uwe Uknow Uthe Uaccount Uis Uactually Uuncollectible.
Invoice: U- UCORRECT UANSWER U-
A Usource Udocument Uthat Uidentifies Uthe Udate Uof Usale, Uthe Ucustomer, Uthe Uspecific Uitems Usold, Uthe
Udollar Uam Uount Uof Uthe Usale, Uand Uthe Upayment Uterms.
Net Uaccounts Ureceivable: U- UCORRECT UANSWER U-
The Udifference Ubetween Utotal Uaccounts Ureceivable Uand Uthe Uallowance Ufor Uuncollectible Uaccounts.
Net URevenue U- UCORRECT UANSWER U-
AAcompany's Utotal Urevenues Uless Uany Udiscounts, Ureturns, Uand Uallowances
Notes Ureceivable: U- UCORRECT UANSWER U-
Formal Ucredit Uarrangements Uevidenced Uby Ua Uwritten Udebt Uinstrument, Uor Unote.
Percentage-of-receivables Umethod: U- UCORRECT UANSWER U-
Method Uof Uestimating Uuncollectible Uaccounts Ubased Uon Uthe Upercentage Uof Uaccounts Ureceivable
Uexpected Unot Uto Ube Ucollected
Receivables Uturnover Uratio: U- UCORRECT UANSWER U-
Number Uof Utimes Uduring Ua Uyear Uthat Uthe Uaverage Uaccounts Ureceivable Ubalance Uis Ucollected U(or
U"turns Uover U"). UIt Uequals Unet Ucredit Usales Udivided Uby Uaverage Uaccounts Ureceivable.
Sales Uallowance: U- UCORRECT UANSWER U-
Seller Ureduces Uthe Ucustomer's Ubalance Uowed Uor Uprovides Uat Uleast Ua Upartial Urefund Ubecause Uof
Usome Udefici Uency Uin Uthe Ucompany's Ugood Uor Uservice
Sales Udiscount: U- UCORRECT UANSWER U-
Reduction Uin Uthe Uamount Uto Ube Ureceived Ufrom Ua Ucredit Ucustomer Uif Ucollection Uon Uaccount Uoccurs
Uwithin Ua Uspecified Uperiod Uof Utime.
Sales Ureturn: U- UCORRECT UANSWER U-Customer Ureturns Ua Uproduct.
