Q&A Hero

Q: Firms that wish to improve control over cash disbursements use a voucher system.

Q: The blind copy of the purchase order that goes to the receiving department contains no item descriptions.

Q: In non-manufacturing firms, purchasing decisions are authorized by inventory control.

Q: How is independent verification carried out in a manual revenue system?

Q: For each of the following documents, describe its purpose, the functional area preparing it, and the key data included: remittance advice, remittance list, deposit slip.

Q: What role does each of the following departments play in the cash receipts subsystem: mail room, cash receipts, accounts receivable, and general ledger? Be complete.

Q: With regard to segregation of duties, rule two is that asset custody and record keeping should be separated. What does this require in the revenue cycle?

Q: With regard to segregation of duties, rule one is that transaction authorization and transaction processing should be separated. What does this require in the revenue cycle?

Q: What role does each of the following departments play in the sales order processing subsystem: sales, credit, and shipping? Be complete.

Q: For each of the following documents, describe its purpose, the functional area preparing it, and the key data included: sales order, bill of lading, credit memo.

Q: How may an employee embezzle funds by issuing an unauthorized sales credit memo if the appropriate segregation of functions and authorization controls were not in place?

Q: When Clipper Mail Order Co. receives telephone and fax orders, the billing department prepares an invoice. The invoice is mailed immediately. A copy of the invoice serves as a shipping notice. The shipping department removes inventory from the warehouse and prepares the shipment. When the order is complete, the goods are shipped. The clerk checks the customer's credit before recording the sale in the general journal and the account receivable subsidiary ledger. The receptionist opens the mail and lists all payments. The receptionist also handles all customer complaints and prepares sales return forms for defective merchandise. The cashier records all cash receipts in the general journal and makes the appropriate entry in the accounts receivable subsidiary ledger. The cashier prepares the daily bank deposit. Describe at least four internal control weaknesses at Clipper Mail Order Co.

Q: What is the purpose of the credit memo?

Q: What is a bill of lading?

Q: What is the role of the shipping notice?

Q: What is the purpose(s) of the stock release document?

Q: Describe the key tasks in the sales order process.

Q: Give three examples of Access Control in a Point-of-Sale (POS) system.

Q: What makes point-of-sale systems different from revenue cycles of manufacturing firms?

Q: What are the key segregation of duties related to computer programs that process accounting transactions.

Q: What are the three rules that ensure that no single employee or department processes a transaction in its entirety?

Q: What function does the receiving department serve in the revenue cycle?

Q: What specific internal control procedure would detect the misplacement of a sales invoice after preparation and not mailed to the customer? The invoice was never found.

Q: What specific internal control procedure would prevent an increase in sales returns since salesmen were placed on commission?

Q: What specific internal control procedure would prevent an accounts receivable clerk from issuing a fictitious credit memo to a customer (who is also a relative) for goods that were "supposedly" returned from previous sales?

Q: What specific internal control procedure would prevent the shipping clerk from taking goods from the storeroom and sending them to someone who had not placed an order?

Q: What specific internal control procedure would prevent a customer from being billed for all 50 items ordered although only 40 items were shipped?

Q: A credit sale is made to a customer, even though the customer's account is four months overdue. Describe a specific internal control procedure that would prevent this from happening.

Q: A clerk embezzles customer payments on account and covers up the theft by making an adjustment to the accounts receivable ledger. Describe a specific internal control procedure that would prevent this fraud.

Q: A customer payment of $247 was correctly posted in the general ledger but was recorded as $274 in the customer's account receivable. Describe a specific internal control procedure that would detect this error.

Q: The clerk who opens the mail routinely steals remittances. Describe a specific internal control procedure that would prevent or detect this fraud.

Q: What specific internal control procedure would prevent the sale of goods on account to a fictitious customer?

Q: What task can the accounts receivable department engage in to verify that all checks sent by the customers have been appropriately deposited and recorded?

Q: For the revenue cycle, state two specific independent verifications that should be performed.

Q: State two specific functions or jobs that should be segregated in the cash receipts system.

Q: State two specific functions or jobs that should be segregated in the sales processing system.

Q: Distinguish between a packing slip, shipping notice, and a bill of lading.

Q: Which type of control is considered a compensating control? a. segregation of duties b. access control c. supervision d. accounting records

Q: Which document is NOT prepared by the sales department? a. packing slip b. shipping notice c. bill of lading d. stock release

Q: All of the following are advantages of real-time processing of sales except a. The cash cycle is shortened b. Paper work is reduced c. Incorrect data entry is difficult to detect d. Up-to-date information can provide a competitive advantage in the marketplace

Q: The revenue cycle utilizes all of the following files except a. credit memo file b. sales history file c. shipping report file d. cost data reference file

Q: Adjustments to accounts receivable for payments received from customers is based upon a. the customer's check b. the cash prelist c. the remittance advice that accompanies payment d. a memo prepared in the mailroom

Q: The credit department a. prepares credit memos when goods are returned b. approves credits to accounts receivable when payments are received c. authorizes the granting of credit to customers d. none of the above

Q: Periodically, the general ledger department receives all of the following except a. total increases to accounts receivable b. total of all sales backorders c. total of all sales d. total decreases in inventory

Q: Which journal is not used in the revenue cycle? a. cash receipts journal b. sales journal c. purchases journal d. general journal

Q: Which of the following is not a risk exposure in a PC accounting system? a. reliance on paper documentation is increased b. functions that are segregated in a manual environment may be combined in a microcomputer accounting system c. backup procedures require human intervention d. data are easily accessible

Q: The data processing method that can shorten the cash cycle is a. batch, sequential file processing b. batch, direct access file processing c. real-time file processing d. none of the above

Q: Commercial accounting systems have fully integrated modules. The word "integrated" means that a. segregation of duties is not possible b. transfer of information among modules occurs automatically c. batch processing is not an option d. separate entries are made in the general ledger accounts and the subsidiary ledgers

Q: An advantage of real-time processing of sales is a. the cash cycle is lengthened b. current inventory information is available c. hard copy documents provide a permanent record of the transaction d. data entry errors are corrected at the end of each batch

Q: A cash prelist is a. a document that records sales returns and allowances b. a document returned by customers with their payments c. the source of information used to prepare monthly statements d. none of the above

Q: At which point is supervision most critical in the cash receipts system? a. accounts receivable b. general ledger c. mail room d. cash receipts

Q: A weekly reconciliation of cash receipts would include comparing a. the cash prelist with bank deposit slips b. the cash prelist with remittance advices c. bank deposit slips with remittance advices d. journal vouchers from accounts receivable and general ledger

Q: Which department prepares the bill of lading? a. Sales b. Warehouse c. Shipping d. Credit

Q: The printer ran out of preprinted sales invoice forms and several sales invoices were not printed. The best internal control to detect this error is a. a batch total of sales invoices to be prepared compared to the actual number of sales invoices prepared b. sequentially numbered sales invoices c. visual verification that all sales invoices were prepared d. none of the above will detect this error

Q: Internal controls for handling sales returns and allowances do not include a. computing bad debt expense using the percentage of credit sales b. verifying that the goods have been returned c. authorizing the credit memo by management d. using the original sales invoice to prepare the sales returns slip

Q: Which control does not help to ensure that accurate records are kept of customer accounts and inventory? a. reconcile accounts receivable control to accounts receivable subsidiary b. authorize credit c. segregate custody of inventory from record keeping d. segregate record keeping duties of general ledger from accounts receivable

Q: Good internal controls in the revenue cycle should ensure all of the following except a. all sales are profitable b. all sales are recorded c. credit is authorized d. inventory to be shipped is not stolen

Q: Which document is included with a shipment sent to a customer? a. sales invoice b. stock release form c. packing slip d. shipping notice

Q: Which department is least likely to be involved in the revenue cycle? a. credit b. accounts payable c. billing d. shipping

Q: The accounts receivable clerk destroys all invoices for sales made to members of her family and does not record the sale in the accounts receivable subsidiary ledger. Which procedure will not detect this fraud? a. prenumber and sequence check all invoices b. reconcile the accounts receivable control to the accounts receivable subsidiary ledger c. prepare monthly customer statements d. reconcile total sales on account to the debits in the accounts receivable subsidiary ledger

Q: The most effective internal control procedure to prevent or detect the creation of fictitious credit memoranda for sales returns is to a. supervise the accounts receivable department b. limit access to credit memoranda c. prenumber and sequence check all credit memoranda d. require management approval for all credit memoranda

Q: Which situation indicates a weak internal control structure? a. the mailroom clerk authorizes credit memos b. the record keeping clerk maintains both accounts receivable and accounts payable subsidiary ledgers c. the warehouse clerk obtains a signature before releasing goods for shipment d. the accounts receivable clerk prepares customer statements every month

Q: Which of following functions should be segregated? a. opening the mail and making the journal entry to record cash receipts b. authorizing credit and determining reorder quantities c. maintaining the subsidiary ledgers and handling customer queries d. providing information on inventory levels and reconciling the bank statement

Q: Usually specific authorization is required for all of the following except a. sales on account which exceed the credit limit b. sales of goods at the list price c. a cash refund for goods returned without a receipt d. write off of an uncollectible account receivable

Q: Customers should be billed for back-orders when a. the customer purchase order is received b. the backordered goods are shipped c. the original goods are shipped d. customers are not billed for backorders because a backorder is a lost sale

Q: The billing department is not responsible for a. updating the inventory subsidiary records b. recording the sale in the sales journal c. notifying accounts receivable of the sale d. sending the invoice to the customer

Q: The shipping notice a. is mailed to the customer b. is a formal contract between the seller and the shipping company c. is always prepared by the shipping clerk d. informs the billing department of the quantities shipped

Q: The stock release copy of the sales order is not used to a. locate and pick the items from the warehouse shelves b. record any out-of-stock items c. authorize the warehouse clerk to release custody of the inventory to shipping d. record the reduction of inventory

Q: The customer open order file is used to a. respond to customer queries b. fill the customer order c. ship the customer order d. authorize customer credit

Q: The purpose of the sales invoice is to a. record reduction of inventory b. transfer goods from seller to shipper c. bill the customer d. select items from inventory for shipment

Q: Copies of the sales order can be used for all of the following except a. purchase order b. credit authorization c. shipping notice d. packing slip

Q: Which document triggers the revenue cycle? a. the sales order b. the customer purchase order c. the sales invoice d. the journal voucher

Q: The adjustment to accounting records to reflect the decrease in inventory due to a sale occurs in the a. warehouse b. shipping department c. billing department d. inventory control department

Q: The reconciliation that occurs in the shipping department is intended to ensure that a. credit has been approved b. the customer is billed for the exact quantity shipped c. the goods shipped match the goods ordered d. inventory records are reduced for the goods shipped

Q: The revenue cycle consists of a. one subsystem"order entry b. two subsystems"sales order processing and cash receipts c. two subsystems"order entry and inventory control d. three subsystems"sales order processing, credit authorization, and cash receipts

Q: When customer payments are received, the mailroom clerk sends the checks to the cash receipts clerk and the remittance advices to the AR clerk.

Q: The accounts receivable clerk is responsible for updating the AR Control accounts to reflect each customer sale.

Q: The stock release document is prepared by the shipping department to provide evidence that the goods have been released to the customer.

Q: In a manual system, the billing department is responsible for recording the sale in the sales journal.

Q: The warehouse is responsible for updating the inventory subsidiary ledger.