Final Review pt 2 notes

Which of the following is not one of the usual differences between manual accounting systems and modern, complex systems (such as ERP)?

All paper records and paper documents no longer exist

In the sales process, a sales invoice is created by which department?

Billing department

The document prepared when purchased items are returned is a(n):

Debit Memo

Examples of characteristics that indicate a company may be riskier with respect to the revenue process include all of the following, except:

Changes in sales prices or customers are infrequent

Sales invoices may not be prepared for all shipments. Which of the following internal control procedures can best reduce the above risk?

Computer notification of unbilled shipments

the terms of agreement between the company and the common carrier are documented in a:

bill of lading

This type of highly integrated IT system, inter-company, computer-to-computer, communicates sales and purchase documents electronically with a standard business format.

Electronic data interchange

The main reason that receiving clerks are denied access to purchase order quantities and prices is to:

Ensure that the receiving clerk actually takes the time to verify the accuracy of a delivery (eg count the items) before accepting it

Features that assist management and accountants, as the result of the point-of-sale systems, include all of the following, except:

List prices can be changed by the check-out clerks to take advantage of any prices.

Receiving clerks may steal purchased goods. Which of the following internal control procedures can best reduce the above risk?

Physical controls such as security cameras

This form is prepared by the buyer, and sent to the seller, to indicate the details of products or services that the seller will provide to the buyer. Information included on this form would be: products, quantities, and agreed-upon prices.

Purchase order

All of the following documents are involved in the purchase return process, except:

Receiving log

General controls in an IT system that processed sale transactions would include all of the following, except:

Review transaction accuracy

Which of the following a control weakness of the expenditure process? a. A purchasing agent updates the inventory subsidiary ledger when an order is placed b. An employee in accounts payable maintains the accounts payable subsidiary ledger c. Purchasing agents purchase items only if they have received an approved purchase requisition d. The receiving dock employee counts and inspect goods and prepares a receiving document that is forwarded to accounts payable

a. A purchasing agent updates the inventory subsidiary ledger when an order is placed

All of the following departments are involved in the sale return process, except: a. Cash receipts department b. Accounts receivable department c. Receiving department d. Inventory control department

a. Cash receipts department

Which of the following documents will the seller send to the customer after a sale? a. Customer monthly statement b. Picking ticket c. Shipping log d. Purchase order

a. Customer monthly statement

The ____ is prepared by the buyer and sent to the seller to request a refund or reduction of amounts owed to the seller due to returned items or incorrect or damaged goods. a. Debit memo b. Purchase order c. Receiving report d. Credit memo

a. Debit memo

In the sales process, the inventory subsidiary ledger is generally maintained by which department? a. Inventory control b. Credit department c. Shipping department d. Sales department e. Accounts receivable department

a. Inventory control

Which of the following is not a correct step in the purchase return process under a perpetual inventory system? a. Purchase return account is credited to reflect the return b. Shipping department ships the items to the vendor c. Inventory subsidiary ledger is updated to reflect returned items d. Accounts payable department updates the accounts payable subsidiary ledger

a. Purchase return account is credited to reflect the return

Payments may be made for items not received. Which of the following internal control procedures can best reduce the above risk? a. Requires three-way match of purchasing document before payments are approved b. Match purchase order with receiving report c. Require purchase order to be approved d. Perform reconciliation between subsidiary ledger and general ledger

a. Requires three-way match of purchasing document before payments are approved

Which of the following is correct regarding the evaluated receipt settlement (ERS)? a. The ERS required exact matching between goods and PO. All mismatches will be rejected b. The ERS does not allow receiving clerk to access PO c. The ERS allows price to be flexibly modified after the buyer orders items d. When ERS is used, three-way matching should still be performed

a. The ERS required exact matching between goods and PO. All mismatches will be rejected

Within the sales process, after receiving a customer purchase order, all of the following steps should be performed before the seller sends a sales order acknowledgement back to the customer, except: a. Ship the goods to the customer b. Check customer credit c. Verify enough items are in stock to fulfill the order d. Sales order preparation and approval

a. Ship the goods to the customer

Which of the following departments is not involved in the purchasing process? a. Shipping department b. Accounts payable department c. Inventory control d. Warehouse

a. Shipping department

Within the purchases process, which of the following is the first document prepared and thereby the one that triggers the remaining purchasing processes? a. The purchase requisition b. The purchase order c. The receiving report d. The invoice

a. The purchase requisition

All of the following indicate a high level of risk associated with sales returns, except: a. Transactions may be record in the wrong amount b. Returns are received by consignees or under other arrangements not directly controlled by the company c. There is a high volume of credit memo activity d. The company depends on a single customer or very few key customers

a. Transactions may be record in the wrong amount

The expenditure process is similar to the revenue process, except that goods and cash flow in the opposite direction a. True b. False

a. True

The internal control process that requires the approval of the purchase return transaction take place before the preparation of the debit memo, will help to minimize the risk of invalid returns. a. True b. False

a. True

Common types of independent checks within the revenue process includes all of the following except: a. Verification of the bank statement and the accounts payable account in the general journal b. Reconciliation of inventory records with actual (counted) quantities on hand c. Verification of information in the sales journal and on sales invoices d. Reconciliation of accounts receivable detail with invoiced and with the general ledger

a. Verification of the bank statement and the accounts payable account in the general journal

The internal control of the expenditure process requires vendor statements to be reviewed monthly and reconciled with_______. a. Inventory subsidiary ledger b. Accounts payable subsidiary ledger c. Accounts receivable subsidiary ledger d. Fixed assets subsidiary ledger

b. Accounts payable subsidiary ledger

Which of the following documents is prepared in order to more accurately estimate bad debt? a. Bank reconciliation b. Accounts receivable aging report c. Sales order d. Credit memo

b. Accounts receivable aging report

Before goods are shipped, a company needs to match the goods with which of the following to ensure the shipment is valid and actually ordered by a real customer? a. A closed sales order b. An approved and open sales order c. A bill of lading d. Packing slip

b. An approved and open sales order

Which of the following is not one of the stated physical controls for inventory in a warehouse? a. Alarm systems b. Backup data c. Security guards d. Surveillance cameras

b. Backup data

A manager suspects that certain employees are ordering merchandise for themselves over the internet without recording the purchase or receipts of the merchandise. When vendors' invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoiced and related vouchers. To trace whether this is actually happening, it would be best to begin tracing from the: a. Receiving reports b. Cash disbursements c. Vendors' invoices d. Approved vouchers

b. Cash disbursements

The following circumstances may indicate risks related to cash collections, except: a. Lack of consistency in the volume or source of collections b. Centralized cash collection c. High volume of cash collections d. Presence of cash collections denominated in foreign currencies

b. Centralized cash collection

After a credit memo is created and the "return for credit" box is checked on the credit memo, which of the following accounting record updates need to be made? a. Credit sales return b. Credit account receivable c. Debit cash d. Debit accounts payable

b. Credit account receivable

In the purchasing process a perpetual inventory system, after receiving the vendor's invoice, the company should perform all of the following steps, except: a. Increase accounts payable b. Decrease inventory d. Validate vendor's invoice by matching it with other source documents related to this purchase c. Update accounts payable subsidiary ledger

b. Decrease inventory

One of the newest technologies related to payables is one where invoices are exchanged and payments are made via the internet. The name given to this process is: a. Routing Application Invoice Delivery (RAID) b. Electronic Invoice Presentment and Payment (EIPP) c. Electronic Invoice Payment Procedures (EIPP) d. Random Array of Invoice Disbursements (RAID)

b. Electronic Invoice Presentment and Payment (EIPP)

If a company uses the lockbox method to receive cash from customers, checks are mailed to the headquarters of the company and put in a locked security box. a. True b. False

b. False

Advantages of an automated system includes all of the following, except: a. Provides management more timely information to forecast future cash outflows for payment of invoices b. Increased cost of the system c. Summarized detailed transactions into summary amounts that are posted to the general ledger accounts d. Reduce time, costs, eros, and duplicate payments

b. Increased cost of the system

Revenues may be recorded before the related shipment occurs. Which of the following internal control procedures can best reduce the above risk? a. Matching sales invoice with accounts receivable subsidiary ledger b. Match shipping documents with sales order data and invoice before recording the sale c. Match shipping documents with receiving report and account receivable subsidiary ledger before recording the sale d. Require customers to be authorized before making sales to them

b. Match shipping documents with sales order data and invoice before recording the sale

The internal control process of having the receiving reports prepared on pre-numbered forms so that the sequence of receipts can be reviewed for proper recording will help to minimize the related risk of: a. Fictitious purchases b. Omitted records for purchases c. Timing issue d. Invalid vendors

b. Omitted records for purchases

A ____ is a document prepared by the warehouse personnel that lists all the items included in a shipment. This document is sent to the customer with the package. a. Picking ticket b. Packing slip c. Bill of lading d. Sales order e. Sales invoice

b. Packing slip

Several problems have resulted recently as a result of recording sales invoices to the wrong customer account. Which of the following internal control procedures can best reduce the above risk? a. Field check b. Periodic confirmation of customer account balances c. Independent authorization for shipments d. Program change controls

b. Periodic confirmation of customer account balances

This form documents the quantities and description of items ordered by the customer. Warehouse staff refers to this form to pull items from the warehouse shelves and package them to the customer. a. Price list b. Picking ticket c. Sales invoice d. Packing slip

b. Picking ticket

Personnel who works in the receiving area should complete all of the following processes, except: a. Preparing a receiving report b. Preparing an invoice c. Inspecting goods received for damage d. Counting the goods received

b. Preparing an invoice

Credit memos may be issued at full price, when the goods were originally sold at a discount. Which of the following internal control procedures can best reduce the above risk? a. Sales order should be reviewed and approved before making a sales to the customer b. Preparing credit memo based on original sales invoices c. Match receiving report with credit memo d. Verify sale invoice for mathematical accuracy before sending it to customers

b. Preparing credit memo based on original sales invoices

Credit cards given to employees by the organization in order for the employees to make designated purchases are called: a. Expenditure cards b. Procurement cards c. Organization purchase cards d. Employee debit cards

b. Procurement cards

Before payment is approved and a check is issued to the vendor to pay for an invoice, the company should perform a three-way match to make sure the invoice is valid. The three-way match refers to matching: a. Purchase requisition, receiving report, and bank statement b. Purchase order, receiving report, and vendor's invoice c. Purchase order, receiving log, and sales invoice d. Purchase requisition, purchase order, and receiving report

b. Purchase order, receiving report, and vendor's invoice

This form is prepared to document the need to make a purchase and request that the specific items and quantities be purchased a. Purchase invoice b. Purchase requisition c. Purchase order d. Purchase journal

b. Purchase requisition

Internal control activities within the purchasing process, identifies as segregation of duties, would include all of the following, except: a. Responsibility for authorization, custody, and record keeping are to be assigned to different individuals b. Purchasing records and programs must be protected from unauthorized access c. Complete separation of inventory custody from inventory accounting d. Duties related to requisitioning, ordering, purchase approval, receiving, inventory control, accounts payable, and general accounting are to be delegated to separate departments or individuals

b. Purchasing records and programs must be protected from unauthorized access

A source document prepared by the personnel in the receiving dock that documents the quantity and condition of the items received is called a: a. Sales invoice b. Receiving report c. Packing list d. Bill of lading

b. Receiving report

Payments may be made for items previously returned to the vendor. Which of the following internal control procedures can best reduce the above risk? a. Retain copies of receiving documents b. Timely update accounts payable subsidiary ledger after debit memo is prepared c. Authorize purchase return d. Compare accounts receivable sub ledger with general ledger

b. Timely update accounts payable subsidiary ledger after debit memo is prepared

Which of the following controls is not normally performed in the accounts payable department? a. Asset and expense accounts to be recorded are assigned b. Unused purchase order and receiving reports are accounted for c. Vendor invoices are selected for payment d. The vendors invoice is matched with the related receiving report

b. Unused purchase order and receiving reports are accounted for

In the cash receipt process, after cash is received, the accounts receivable department needs to: a. All of the listed items are correct b. Update accounts receivable subsidiary ledger for the receipts c. Deposit cash to the bank d. Send a remittance advice back to the customer

b. Update accounts receivable subsidiary ledger for the receipts

The careful oversight of cash balances, forecasted cash payments, and forecast cash receipts to insure the adequate cash balances exist to meet obligations is called: a. Independent checks b. Cash disbursement c. Cash management d. Accounts payable management

c. Cash management

The _______ is prepared to document a sales return and to adjust the amount of the customer's credit status. a. Sales invoice b. Debit memo c. Credit memo d. Receiving log

c. Credit memo

During the sales process under a perpetual inventory system, when goods are shipped and an invoice is created, the following accounting record updates need to be made, except: a. Debit to accounts receivable b. Credit to sales revenue c. Credit to cost of goods sold d. Post to accounts receivable subsidiary ledger

c. Credit to cost of goods sold

When goods are received at the end of the accounting period, and the invoice is not received from the vendor until after the start of the following period, the company may not record all the liabilities. This is referred to as a(n): a. Channel stuffing b. Obligation referral c. Cutoff issue d. Liability deferral

c. Cutoff issue

This type of system matching takes place without invoices. The receipt of goods are carefully evaluated and, if it matches the purchase order, settlement of the obligation occurs through the system. a. Controlled access invoicing b. Electronic data interchange c. Evaluated receipt settlement d. Business process engineering

c. Evaluated receipt settlement

Input controls such as field check, validity check, limit check, reasonableness check, and completeness check can reduce the risk of: a. Hackers b. Virus and worm attacks c. Invalid or erroneous data entry d. Unauthorized access

c. Invalid or erroneous data entry

The security of having cash receipts deposited in the bank on a daily basis will help to minimize the related risk of: a. Invalid bank account b. Invalid receipts c. Lost or stolen cash d. Duplicate transactions

c. Lost or stolen cash

In the following proper segregation of duties, those who handle cash should not be granted any of the following authorities, except: a. Journalize cash related transactions b. Information systems programming c. Maintain custody of inventory d. Reconcile the bank account balance with accounting records

c. Maintain custody of inventory

The preparation of packing lists and shipping records on prenumbered forms will help to minimize the related risk of: a. Wrong customers b. Incorrect amounts c. Omitted transactions d. Invalid sales

c. Omitted transactions

Which of the following relationships does not violate the rules of segregation of duties? a. Entering sales in the sales journal and handling the inventory b. Credit authorization and preparation of the sales order c. Preparing sales order and check inventory availability d. Preparing goods for shipment and updating inventory records

c. Preparing sales order and check inventory availability

Under a system of sound internal controls, if a company sold defective goods, the return of those goods from the customer should be accepted by the: a. Purchasing clerk b. Sales clerk c. Receiving clerk d. Inventory control clerk

c. Receiving clerk

The authorization of sales returns requires that certain individuals within the company be assigned the authority for all of the following, except: a. Develop sales return policies b. Approve credit memos c. Record the credit memos d. Authorize sales returns

c. Record the credit memos

Which of the following is correct regarding the cash disbursement process? a. The shipping department sends a copy of shipping documents to the cash disbursement department b. The general ledger department send payment to vendor c. The accounts payable department selects items for payment d. The cash disbursement department manages and updates vendor subsidiary accounts

c. The accounts payable department selects items for payment

If a company personnel erroneously applied a cash receipt to a wrong customer, which of the following is incorrect? a. The accounts payable subsidiary ledger balances are not impacted b. The cash general ledger balance is still accurate c. The accounts receivable general ledger balance will be wrong d. The accounts receivable subsidiary ledger balances are inaccurate

c. The accounts receivable general ledger balance will be wrong

Which of the following is not a control weakness of the revenue process? a. Collections received by checks are immediately forwarded unopened to the accounting department b. Customer returns are presented to the sales department for preparation of a receiving report c. A cash receipts journal is prepared by the treasurer's department d. A bank reconciliation is prepared on a monthly basis by the treasurer's department e. Cash collections are deposited in the bank account on a weekly basis

d. A bank reconciliation is prepared on a monthly basis by the treasurer's department

Duplicate credit memos may be issued for a single sales return. Which of the following internal control procedures can best reduce the above risk? a. Verify credit memo for mathematical accuracy b. Preparing credit memo based on prices in the price list c. Approve customer before making sales d. Compare receiving report and receiving log with credit memo

d. Compare receiving report and receiving log with credit memo

Upon entering sales orders in your new computer system, a sales clerk mistakenly omitted customer numbers from the entries. Which of the following internal control procedures can best reduce the above risk? a. Check digit b. Reasonableness check c. Field check d. Completeness check

d. Completeness check

In the cash disbursement process, if cash payment is sent to the vendor within the discount period, in a perpetual inventory system, all of the following accounting records updates should be made, except: a. Credit to cash b. Credit to inventory c. Debit to accounts payable d. Credit to purchase discount

d. Credit to purchase discount

This term refers to moving the current accounting period's cut-off date forward to include sales that correctly occur in a future period. This activity occurs so that the selling company can inflate their sales in the current period. a. Shipping reversal b. Channel stuffing c. Sales deferral d. Leaving sales open

d. Leaving sales open

The recording responsibilities for cash receipts includes all of the following, except: a. Maintaining a cash receipts journal b. Posting subsidiary ledger totals to the general ledger c. Updating accounts receivable records to individual customers d. Making bank deposits

d. Making bank deposits

In order to ensure that all records are updated only for authorized transactions, appropriate individuals should be assigned all of the following duties, except: a. Approving electronic funds b. Approving bank deposits c. Opening and closing all bank accounts d. Preparing the bank reconciliation

d. Preparing the bank reconciliation

The internal control process of requiring physical controls in the warehouse and receiving areas, in order to limit access to inventory items, will help minimize the risk of: a. Incorrect posting b. Omitted purchases c. Invalid vendors d. Stolen goods

d. Stolen goods

Which of the following events would not constitute the start of the purchasing process? a. An operations manager becomes aware of additional quantities of material that will be needed to fulfill sales order b. An accountant detects potential shortages in documented inventory quantities c. A warehouse attendant notices a particularly low stock level d. The purchasing manager receives a shipment of raw materials that she had ordered

d. The purchasing manager receives a shipment of raw materials that she had ordered

EDI systems have many advantages within the revenue and cash collection processes. Which of the following is not one of those benefits? a. Save postage cost related to sending order b. Save time needed to key in orders c. Reduce risks related to mail delays and human keying errors d. Trading partners gain more access to company data

d. Trading partners gain more access to company data

Which of the following form, or source documents, indicates the start of the sales process? a. Receiving report b. Sales invoice c. Bill of lading d. Purchase requisition e. Customer purchase order

e. Customer purchase order

A _____ is a credit to the customer account made to compensate the customer for a defective product or a late shipment without having the customer return the product

sales allowance

In order to help safeguard the security and confidentiality in an electronic business environment, a company should implement controls such as user ID, password, log-in procedures, access levels, and authority tables in order to reduce the risk of:

unauthorized access to the systems