At What Point Do Most Companies Recognize Liabilities in the Acquisition

question 7

Multiple Choice

At what point do most companies recognize liabilities in the acquisition and payment cycle when the goods are shipped FOB Destination?

• A) the issuance of a purchase order
• B) receipt of acknowledgement of order by vendor
• C) receipt of goods or services
• D) the receipt of a vendor invoice

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Definitions:

Accounts Receivable

Money owed to a company by its debtors, representing funds due for goods or services that have been delivered but not yet paid for.

Maturity Value

The amount payable to the holder of a financial instrument at the due date, which includes the principal and any accrued interest.

Face Value

The nominal value stated on a financial instrument, such as a bond or stock certificate, representing its value at issuance.

Allowance for Doubtful Accounts

An estimation of the amount of accounts receivable that may not be collectible, serving as a contra-asset on the balance sheet.