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86 Cards in this Set
- Front
- Back
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1) Basic segregation of duties requires the credit manager reports to the ________ and the treasurer report to the ________.
A) treasurer; controller B) treasurer; vice president of finance C) controller; vice president of finance D) marketing manager; vice president of finance |
B) treasurer; vice president of finance
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2) The ________ normally triggers the billing process in the revenue cycle.
A) sales order received from the sales department B) picking ticket received from the sales department C) packing slip received from the shipping department D) journal voucher received from the shipping department |
C) packing slip received from the shipping department
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3) The ________ normally triggers the customer payment recording process. A) sales invoice B) deposit slip C) remittance advice D) customer monthly statement |
C) remittance advice |
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4) The ________ should always be included with a merchandise shipment to a customer.A) picking ticket B) packing slip C) sales invoice D) remittance advice |
B) packing slip |
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5) According to generally accepted accounting principles, a sale is recognized when A) cash is received from the customer. B) inventory is removed from the warehouse.C) inventory becomes the legal property of the customer. D) a sales order is approved by sales, inventory control, and credit departments. |
C) inventory becomes the legal property of the customer. |
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6) ________ is not a basic activity of the revenue cycle. A) Sales order entry B) Shipping C) Receiving D) Billing |
C) Receiving |
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7) When a customer places an order (on account) for a certain product, what should be done before the order is checked for inventory availability? A) The customer's available credit should be checked. B) The sales order should be created and written to a file. C) Shipping should be notified of an order in process. D) A picking list should be generated for the warehouse. |
A) The customer's available credit should be checked. |
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8) How is credit approval generally handled for established customers with a documented payment history? A) A new credit application is requested. B) General authorization by a sales clerk C) Specific authorization by the credit manager D) A formal credit check should be made for each sale. |
B) General authorization by a sales clerk |
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9) What is a typical procedure for processing sales orders from new customers or customers making a purchase that causes their credit limit to be exceeded? A) General authorization to approve the order is given to sales clerks. B) Specific authorization must be granted by the credit manager. C) The sale should be rejected. D) The sales clerk should order a report from a credit bureau before approving the order. |
B) Specific authorization must be granted by the credit manager. |
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10) Checking the quantity of inventory available before accepting a sales order is a good practice for all of the reasons except toA) determine which items may need to be back ordered. B) verify the accuracy of the perpetual inventory records. C) inform the customer about availability and delivery times. D) update inventory records to reduce the quantity available by the number of items ordered. |
B) verify the accuracy of the perpetual inventory records. |
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11) Special software packages called ________ can help an organization manage customer service. A) EDI systems B) CRM systems C) POS systems D) VMI systems |
B) CRM systems |
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12) The ________ is a legal contract that defines responsibility for goods that are in transit. A) bill of lading B) packing slip C) back order D) picking list |
A) bill of lading |
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13) Two documents usually accompany goods shipped to a customer. What are the two documents? A) a bill of lading and an invoice B) a packing slip and a bill of lading C) an invoice and a packing slip D) an invoice and a sales order |
B) a packing slip and a bill of lading |
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14) The basic document created in the billing process is call a ________. A) bill of lading B) sales invoice C) sales order D) packing list |
B) sales invoice |
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15) A company uses the method for tracking accounts receivable where customers pay according to individual sales invoices. This describes the ________ method. A) monthly statement B) open-invoice C) balance forward D) cycle billing |
B) open-invoice |
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16) A method for tracking accounts receivable that matches specific invoices and payments from the customer is called a(n) ________ method. A) specific identification B) balance forward C) cycle billing D) open-invoice |
D) open-invoice |
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17) The document a customer returns with their payment and that identifies the source and the amount of the payment is called a A) remittance advice. B) remittance list. C) credit memorandum. D) debit memorandum |
A) remittance advice. |
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18) In the ________ method of tracking accounts receivable, customers pay according to the amount showing on their monthly statement and payments are applied against the total account balance. A) specific identification B) open-invoice C) balance forward D) remittance advice |
C) balance forward |
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19) When a customer pays off the balance on an invoice, the payment is credited to the ________ file. A) customer master B) sales transaction C) cash receipts master D) All of the above are correct. |
C) balance forward |
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20) A type of business document in which part of the original document is returned to the source for further processing is called a ________ document. A) feedback B) returnable C) closed-loop D) turnaround |
D) turnaround |
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21) A document typically encountered in the revenue cycle that is both an output document and a source document is the A) sales invoice. B) customer purchase order. C) sales order. D) packing slip. |
A) sales invoice. |
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22) A(n) ________ system prepares and mails monthly statements to customers throughout the entire month, instead of just at the end of the month. A) continuous B) open-invoice C) cycle billing D) balance forward |
C) cycle billing |
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23) The activities involved in soliciting and processing customer orders within the revenue cycle are known as the A) sales order entry process. B) shipping order process. C) revenue process. D) marketing process. |
A) sales order entry process. |
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24) Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy Company. He is a product packer. The headphones give him computer-generated instructions so he knows the location of each item and quantity that should be included in the order. These instructions are the equivalent of a A) picking ticket. B) bill of lading. C) packing slip. D) sales order. |
A) picking ticket. |
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25) The shipping department at Eka Toys follows policies that determine which carrier will deliver orders according to the size, weight, and destination of the shipment. It maintains standing agreements with shippers that specify legal responsibility for the shipment while it is in transit. The terms of the shipping agreements are documented on A) picking tickets. B) packing slips. C) bills of lading. D) RFID tags. |
C) bills of lading. |
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26)The accounts receivable management method typically used by credit cardcompanies is A)balance forward. B)postbilling. C)monthly statement. D)open-invoice.0.1ݮ |
A) balance forward. |
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34) If a firm does not use an ERP, the best way to mitigate the risk of the destruction of master data is to A) implement backup and disaster recovery procedures. B) use an ERP. C) proper segregation of duties. D) use of multiple master data files. |
A) implement backup and disaster recovery procedures. |
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35) If a firm uses an ERP, the best way to mitigate the risk of the destruction of master data is to A) frequently update the ERP system. B) implement the ERP system in three separate instances. C) periodically audit the ERP system. D) integrate the ERP system with all IT functions. |
B) implement the ERP system in three separate instances. |
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36) Identify a useful tool for monitoring accounts receivable. A) ERP exception report B) accounts receivable aging report C) accounts receivable tolerance report D) customer credit limit report |
B) accounts receivable aging report |
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37) An accounts receivable aging report is useful for doing everything except A) estimating bad debts. B) estimating future sales. C) projecting the timing of future cash flows. D) deciding whether to increase a specific customer's credit limit. |
B) estimating future sales. |
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38) It costs ________ times as much to acquire a new customer as it does to make a sale to an existing customer. A) two B) five C) eight D) ten |
B) five |
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39) Research suggests which of the following is key to improving total customer satisfaction? A) price of product B) speed of shipping C) quality and nature of customer contact after the sale D) quality and nature of customer contact before the sale |
C) quality and nature of customer contact after the sale |
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40) A picking ticket is generated by the A) shipping process. B) sales order entry process. C) packing process. D) billing process. |
B) sales order entry process. |
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41) A picking ticket is generated by the A) shipping process. B) sales order entry process. C) packing process. D) billing process. |
B) sales order entry process. |
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42) The packing slip A) lists the quantity, price, and description of each item included in the shipment. B) lists the price and description of each item included in the shipment. C) lists the quantity and description of each item included in the shipment. D) lists the quantity and price of each item included in the shipment. |
C) lists the quantity and description of each item included in the shipment. |
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1) Which of the decisions below is not ordinarily found as part of the revenue cycle? A) What credit terms should be offered? B) How often should accounts receivable be subjected to audit? C) How can customer payments be processed to maximize cash flows? D) What are the optimal prices for each product or service? |
B) How often should accounts receivable be subjected to audit? |
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2) Key differences exist when an integrated Enterprise Resource Planning system (ERP) replaces an existing AIS or legacy system. For example, ________ are more accurate and timely, enabling sales order entry staff to provide customers more accurate information about delivery dates. A) inventory records B) cash receipts C) credit approval decisions D) exception reports |
A) inventory records |
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3) Which of the following is not a key decision that needs to be made in the revenue cycle?A) How should merchandise be delivered to customers? B) Should credit be extended to customers? C) How can customer payments be processed to maximize cash flow? D) Which vendor should inventory be purchased from? |
D) Which vendor should inventory be purchased from? |
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4) Regularly reviewing an accounts receivable aging report can help management do what? A) spot firms who are falling behind in their payments B) identify customers who have not purchased anything lately C) improve the speed which customers make payments D) determine whether the firm's pricing policy is effective |
A) spot firms who are falling behind in their payments |
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5) Regularly reviewing an accounts receivable aging report can help management do what? A) identify customers who have not purchased anything lately B) determine whether changes are needed in the firm's credit policies C) improve the speed which customers make payments D) determine whether the firm's pricing policy is effective |
B) determine whether changes are needed in the firm's credit policies |
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6) By using an ERP to merge the billing, sales, and marketing functions, the firm may be able to A) bill the customer right after the sale occurs. B) market products and services on bills sent to customers. C) use customer's past purchase history to send information about related products and services the customer may be interested in.D) eliminate the need for a firm to have a billing, sales, and marketing department. |
C) use customer's past purchase history to send information about related products and services the customer may be interested in. |
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7) Suppose management wanted to increase the speed of processing customer payments. One way to speed up payment transaction processing is to A) use a FEDI. B) use JEDI analysis software. C) eliminate credit sales. D) extend the amount of credit offered to customers |
A) use a FEDI. |
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8) True or False: Shipping efficiency can often be improved by replacing RFID tags with bar codes. |
FALSE |
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1) Before a shipping notice is prepared during the revenue cycle, shipping department personnel should match the inventory received from the warehouse to the A) sales order. B) picking tickets. C) picking ticket and sales order. D) sales order and bill of lading. |
C) picking ticket and sales order. |
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2) Which is the best control to prevent invoicing customers for more than the actual quantity shipped? A) Use the information from the sales order to prepare the sales invoice. B) Use the information from the packing slip to prepare the sales invoice. C) Use the information from the bill of lading to prepare the sales invoice. D) Use the information from the picking ticket to prepare the sales invoice. |
B) Use the information from the packing slip to prepare the sales invoice. |
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3) The cashier deposits checks for Benedek Incorporated and also prepares payments to vendors. Of the following, who is best able to reconcile the bank statement to Benedek's records on a regular basis? A) cashier B) internal audit department C) treasurer D) external auditor |
B) internal audit department |
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4) A monthly statement sent to customers serves a control purpose by A) providing an opportunity for customers to verify the balance owed and activity on the account. B) triggering the process to record a customer payment. C) summarizing invoices and amounts due for customers. D) reminding customers of the balance due and due date. |
A) providing an opportunity for customers to verify the balance owed and activity on the account. |
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5) Which of the following is not one of the controls when customer payments are commingled with other mail? A) preparing a remittance list as mail is opened B) restrictively endorsing checks when received C) requiring two mail room clerks to open mail together D) requiring the controller to be personally present when mail is received and opened |
D) requiring the controller to be personally present when mail is received and opened |
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6) Matching customer account numbers and inventory item numbers to the numbers in the customer and inventory master files is an example of a A) completeness test. B) field check. C) reasonableness test. D) validity check. |
D) validity check. |
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7) During the sales order entry process, a ________ is performed to compare the quantity ordered with the standard amounts normally ordered. A) completeness test B) redundant data check C) field check D) reasonableness test |
D) reasonableness test |
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8) During the sales order entry process, a ________ is performed to verify that each transaction record contains all appropriate data items. A) completeness test B) redundant data check C) field check D) reasonableness test |
A) completeness test |
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9) The best solution for maintaining accurate automated perpetual inventory system is to useA) closed-loop verification when inventory is received from vendors and recorded. B) point of sale devices integrated with inventory records. C) periodic physical counts to reconcile with perpetual inventory records. D) RFID tags. |
D) RFID tags. |
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10) Segregation of duties controls dictates that the collection and recording functions be kept separate from each other. However, the accounts receivable department needs to know when customers pay their invoices. What is a solution to this potential internal control problem? A) Establish a lockbox arrangement with a bank. B) Have customers send a remittance advice with their payment. C) Have mailroom personnel prepare a remittance list which can be forwarded to accounts receivable. D) all of the above |
D) all of the above |
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11) The benefits of a lockbox arrangement with a bank are maximized when A) the bank is located nearby to the company, so remittance advices can be delivered to the company every day. B) several banks around the country are used, in order to minimize the time payments spend in the mail. C) an arrangement is made with only one bank, so all remittance advices can be batched for processing. D) the bank deposits the payments and accesses the customer's information system to record the payments. |
B) several banks around the country are used, in order to minimize the time payments spend in the mail. |
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12) An ________ is an arrangement where a bank receives customer payments and transmits payment data to the organization. A) e-commerce. B) electronic funds transfer (EFT). C) electronic lockbox. D) electronic data interchange (EDI). |
C) electronic lockbox. |
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13) Customers that send their payments electronically directly to the billing company's bank are using A) electronic funds transfer (EFT). B) electronic data interchange (EDI). C) procurement cards. D) an electronic lockbox. |
A)electronic funds transfer (EFT). 0h |
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14) A way to incorporate the advantages of Electronic Data Interchange with the Electronic Funds Transfer is A) Financial Electronic Data Interchange. B) e-commerce. C) to use procurement cards. D) an electronic lockbox |
A) Financial Electronic Data Interchange. |
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15) To ensure proper segregation of duties, only the ________ has authority to issue credit memos. A) accounts receivable supervisor B) controller C) credit manager D) cashier |
C) credit manager |
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16) It has been discovered that credit sales have been made to customers with a poor credit rating. If this continues, the company will face increasing uncollectible receivables and losses due to bad debts. Separation of duties between ________ and ________ should help resolve the problem. A) shipping; billing duties B) credit approval; marketing C) billing; credit approval D) marketing; accounts receivable |
B) credit approval; marketing |
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17) Consider the following revenue cycle scenario: The company has been exposed to customer dissatisfaction and the suggested control procedure to be implemented is to install and use bar-code scanners. What is the threat? A) The company may be shipping the wrong merchandise. B) The company may be shipping the wrong quantities of merchandise. C) The company may be shipping orders to the wrong address. D) All of the above threats may apply to this scenario. |
A) The company may be shipping the wrong merchandise. |
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18) Separating the shipping and billing functions is designed to reduce the threat of A) failure to bill customers. B) billing customers for wrong quantities. C) billing customers before merchandise has been shipped. D) shipping the wrong merchandise. |
A) failure to bill customers. |
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19) All of the following edit checks for online editing of accounts receivable transactions would probably be included except A) validity checks on customer ID and invoice numbers. B) check digit verification on the amount of the sale. C) closed loop verification on the customer ID. D) field checks on the values in dollar fields. |
B) check digit verification on the amount of the sale. |
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20) When a proper segregation of duties exists in the area of handling cash receipts, the ________, who reports to the ________, actually handles the cash and is not the same person who posts cash receipts to customer accounts. A) cashier; treasurer B) cashier; controller C) accountant; treasurer D) accountant; controller |
A) cashier; treasurer |
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21) In a revenue cycle with proper controls, the ________ who reports to the ________, is not involved in any cash handling activities. A) accounts receivable clerk; treasurer B) accounts receivable clerk; controller C) cashier; controller D) cashier; treasurer |
B) accounts receivable clerk; controller |
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22) A serious exposure in the revenue cycle is loss of assets. What is the related threat and applicable control procedure that address this exposure? A) shipping errors; reconciliation of sales order with picking ticket and packing slip B) theft of cash; segregation of duties and minimization of cash handling C) making sales that turn out to be uncollectible; force sales people to make collection calls on customers with past due balances D) poor performance; preparation and review of performance reports |
B) theft of cash; segregation of duties and minimization of cash handling |
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23) Which of the following duties could be performed by the same individual and not violate segregation of duty controls? A) handling cash and posting to customer accounts B) issuing credit memos and maintaining customer accounts C) handling cash and authorizing credit memos D) handling cash receipts and mailing vendor payments |
D) handling cash receipts and mailing vendor payments |
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24) Internal file labels can be used to prevent the loss of data in the revenue cycle since they A) record off-site storage locations. B) keep competitors from accessing files. C) organize the on-site physical storage site. D) reduce the possibility of erasing important files. |
D) reduce the possibility of erasing important files. |
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25) The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He ordered 100 one-size fits all pajama bottoms, but when he ordered 1000 one-size fits all pajama tops, the following error message popped up: "Did you mean to enter a quantity of 1000 for your order?" This message is the result of a A) reasonableness test. B) validity check. C) limit check. D) closed-loop verification. |
A) reasonableness test. |
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26) The manager of Cezary Foods was purchasing inventory from Bogumil Distributors online. The manager entered the items and quantities, completed the checkout and payment process, but received the following error message before the order could be processed: "Please enter your phone number." This message is likely the result of a A) validity check. B) completeness test. C) closed-loop verification. D) customer relationship management software application. |
B) completeness test. |
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27) Bogumil Distributors is an Internet-based wholesaler. Customers enter their orders online. The manager of Cezary Foods was entering an order when the following error message popped up: "Your order exceeds your available credit. You will be contacted within 8 hours." This message is the result of a A) sign check. B) validity check. C) reasonableness test. D) limit check. |
D) limit check. |
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28) Because it is the most fungible of all assets, the management of cash has always been the most difficult of all control issues. The most important of cash controls is A) minimization of cash handling. B) lockbox arrangements. C) segregation of duties. D) frequent reconciliation of records. |
C) segregation of duties. |
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29) A clerk at a grocery store scanned the bar code for a low cost bag of frozen chicken wings then gave his friend an expensive brand-name bag of frozen chicken wings.Which of the following controls would best prevent the clerk from getting away with doing this? A) physical inventory count B) segregation of duties C) limited physical access to bar codes D) use of RFID tags |
D) use of RFID tags |
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The accounts receivable clerk destroys all invoices for sales made to family and friends and does not record the sales in the accounts receivable subsidiary ledgers. The family and friends usually give the clerk cash as a "thank you." Which procedure will not prevent or detect this fraud? A) Send monthly statements to all customers with balances owed. B) Reconcile sales invoices in the billing department to the total debits to accounts receivable subsidiary ledgers. C) Sequentially prenumber all invoices and prepare a sequence check at the end of each day. D) Reconcile the accounts receivable control account to the accounts receivable subsidiary |
A) Send monthly statements to all customers with balances owed. |
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31) Which of the following poses an internal control problem? A) Physical inspection of inventory quantity and condition is outsourced to a firm that specializes in this service. B) Products are released from inventory after a warehouse employee and a shipping clerk both sign the pick list. C) Sales representatives have authority to increase customers' credit limits in $1,000 increments. D) When customer payments are received in the mail, checks are sent to the cashier's office and remittance advices are sent to the accounts receivable department. |
C) Sales representatives have authority to increase customers' credit limits in $1,000 increments. |
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32) The least effective control for preventing an organization from processing fraudulent credit memo is to A) match each credit memo with a receiving report. B) require approval for each credit memo by the credit manager. C) reconcile total of credit memos to total debits posted to customers' subsidiary ledgers. D) sequentially prenumber all credit memos and perform a sequence check at the end of each |
C) reconcile total of credit memos to total debits posted to customers' subsidiary ledgers. |
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40) Which of the following is not a threat to the revenue cycle sales order entry process? A) incomplete orders B) invalid orders C) cash flow problems D) uncollectible accounts |
C) cash flow problems |
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41) Which of the following is not a threat to the revenue cycle shipping process? A) incomplete orders B) inventory theft C) picking the wrong items D) wrong shipping address |
A) incomplete orders |
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42) Which of the following is not a threat to the revenue cycle billing process? A) accounts receivable errors B) loss of customers C) failure to bill D) inaccurate credit memos |
B) loss of customers |
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43) Which of the following is not a general threat to the revenue cycle? A) inaccurate master data B) loss of customers C) poor performance D) unauthorized disclosure of sensitive information |
B)loss of customers3j |
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44) Which of the following is not a general threat to the revenue cycle?
A) inaccurate master data B) loss of customers C) poor performance D) unauthorized disclosure of sensitive information |
B) loss of customers
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45) The legitimacy of customer orders is established by ________ in paper-based customer orders. A) the customer's signature B) the customer's pin number C) the customer's verbal authorization D) prior experience with the customer |
A) the customer's signature |
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46) The legitimacy of customer orders is established by ________ in Internet-based customer orders. A) digital signatures B) the customer's pin number C) the customer's credit card number D) prior experience with the customer |
A) digital signatures |
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47) For strongest segregation of duties, the credit manager should never report to
A) the marketing department. B) the accounting department. C) the credit department. D) the IT department. |
A) the marketing department.
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48) For strongest segregation of duties, a sales representative should never be allowed to A) discuss the company's products. B) negotiate the sales price. C) approve a sale on credit. D) send a customer a gift.
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C) approve a sale on credit.
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49)True or False: A credit sale shouldalways be denied if it exceeds the customer's credit limit. |
FALSE |
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50) True or False: A credit sale should always be reviewed by a credit manager if it exceeds the customer's credit limit.
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TRUE |
