Deck 10: Transaction Cycle The Expenditure Cycle

Question 1

To achieve the overall objective of the purchasing phase in the expenditure cycle,an organisation needs to:

A)Approve and authorise initiated purchases properly.
B)Ensure that accepted goods and services must meet quality and delivery specifications.
C)Record all purchase commitments and obligations accurately.
D)All of the options are correct.

Answer 1

D

Question 2

A cost leadership strategy would indicate that:

A)Suppliers who can provide goods of suitable quality at a lower price should be selected.
B)Suppliers who can provide goods at the lowest price should be selected.
C)Suppliers who can provide goods at a lower price and the longest settlement period should be selected.
D)Suppliers aligned with the organisation's overall business strategy should be selected.

Answer 2

A

Question 3

The business process of paying the right people the right amount at the right time is called …

A)Cash sales
B)Accounts receivable
C)Accounts payable
D)General ledger updating

Answer 3

C

Question 4

Regarding technologies involved in the expenditure cycle,SCM stands for:

A)Supplier and Customer Management software
B)Supply Chain Management software
C)Service and Cash Management software
D)Secure Cash Management software

Question 5

Which of the following does not need to be undertaken during the accounts payable phase?

A)The making of payments by authorised employees only.
B)The making of both accurate and timely payments.
C)Maximisation of any settlement terms.
D)Procuring the right goods for the right amount and at the right time.

Question 6

Which of the following is NOT a concern of the expenditure cycle?

A)Favourable settlement terms are negotiated with the supplier.
B)Payments match supplier invoice,purchase order and delivery docket.
C)Payments are made by authorised employees
D)There are sufficient goods in the finished goods inventory to fulfil the customer's order.

Question 7

The overall objective of the purchasing phase in the expenditure cycle is to:

A)Procure the right goods at the right amount and with the right price
B)Procure the right goods at the right amount and with the right supplier
C)Procure the right goods at the right amount,and to receive those goods at the right time
D)Procure the right goods at the right amount,and to update the accounts payable record

Question 8

Which of the following technologies can provide accurate,timely and cost-effective data sharing to the expenditure cycle?

A)RFID
B)SCM
C)EDI
D)CRM

Question 9

Which of the following cannot be improved by the use of appropriate technologies in the expenditure cycle?

A)Transparency of cash payments.
B)Management of cash payments.
C)Timeliness of cash payments.
D)Recovery of incorrect cash payments.

Question 10

A differentiated strategy would be better served by selecting suppliers with:

A)High quality products,good service standards,and low prices
B)High quality products and good service standards.
C)Suitable quality products,suitable service standards and low prices.
D)Suitable quality products,good service standards and low prices.

Question 11

The expenditure cycle commences when:

A)~ A section of the organisation signals a need for goods or services to be provided
B)The goods or services that are acquired by a section of the organisation have been paid for
C)Purchase orders are appropriately authorised
D)Delivered goods are received

Question 12

Which of the following is a vital indicator when deciding whether a payment should be made to a supplier?

A)The manager's authorisation and agreement.
B)The receipt of a receiving report from the warehouse department.
C)Goods are received in sufficient quantity and good quality.
D)The supplier has provided the company with an invoice.

Question 13

Cash budget is a budget showing:

A)Forecast levels of future cash to be paid to suppliers.
B)Forecast levels of future cash flows into and out of the organisation.
C)Forecast levels of future cash to be received from customers.
D)Forecast levels of future cash needs by a retail business.

Question 14

Poor payment practices can: (i)damage cash flow (ii)damage supplier relationships (iii)lead to fraud (iv)increase the chance of collusion.

A)(i)(ii)only
B)(i)(ii)(iv)only
C)(i)(ii)(iii)only
D)(i)(ii)(iii)(iv)

Question 15

Which of the following technologies is not directly involved in the expenditure cycle?

A)ERP
B)RFID
C)SCM
D)CRM

Question 16

Goods and services should be obtained from:

A)Authorised and pre-vetted suppliers.
B)Suppliers that ask for the lowest price.
C)Suppliers that provide the highest quality.
D)Suppliers within the closest geographic proximity to the company as this will provide lower transport costs.

Question 17

RFID is more suitable for:

A)A car manufacturer.
B)A producer of hand-made luxury handbags.
C)A large restaurant.
D)A small bottle shop.

Question 18

The overall objective of the accounts payable phase in the expenditure cycle is to:

A)Maintain the accounts payable record.
B)Pay the right people the right amount at the right time
C)Determine whether an invoice should be paid.
D)Ensure suppliers are neither overpaid nor underpaid.

Question 19

What are the implications if an organisation is switching to an electronic payment system from a manual payment system?

A)Access security
B)Timing
C)Cash flow
D)All of the options are correct

Question 20

To decide whether a payment should be made to a supplier,an accounts payable clerk should:

A)Examine the receiving report.
B)Be involved in the interaction with suppliers of the goods during the purchasing phase
C)Ensure there are on-going good relationships with suppliers.
D)Search for any unpaid invoices from that supplier.

Question 21

In order to correctly identify how much inventory to purchase it is important to be familiar with the current demand for the goods.This demand for the goods mainly comes from:

A)The conversion process.
B)The expenditure cycle.
C)The sales process.
D)Demand forecast.

Question 22

In terms of the data produced by expenditure activities,an organisation may store detailed data related to:

A)Formal product requisitions only.
B)Both informal and formal product requisitions.
C)Formal product requisitions that have been initiated and fulfilled only.
D)Both informal and formal product requisitions that have been initiated and fulfilled.

Question 23

Which of the following is NOT a check during the requisition stage of the expenditure cycle?

A)The quantities requested are reasonable.
B)The request is for valid goods.
C)The request has been authorised correctly.
D)The supplier is on the approved list.

Question 24

The specialised software to handle the integration of suppliers and customers with the aim of producing and distributing goods and services by quantity,location and time to minimise costs and satisfy required service levels is referred to as:

A)ERP
B)SCM
C)RFID
D)EDI

Question 25

Which of the following is NOT an operational decision to be made in the expenditure cycle?

A)Deciding which suppliers provide the best quality and service at the best prices.
B)Identifying if sufficient cash is available to take advantage of any discounts suppliers have offered.
C)Determining how payment can be made to suppliers in order to maximise cash flow.
D)Determining whether expenditure business processes align with overall business strategy.

Question 26

Goods received data cannot be used to:

A)Investigate the list of items received from suppliers.
B)Update the inventory status of relevant goods
C)Verify invoice validity during the accounts payable phase.
D)Investigate the details of open purchase orders.

Question 27

Which of the following is NOT a strategy level decision to be made in the expenditure cycle?

A)Whether the organisation should consolidate purchases across units to obtain optimal prices.
B)How IT can be used to improve both the efficiency and the accuracy of the inbound logistics function.
C)Identifying where inventories and supplies should be held.
D)Determining the optimal level of inventory and supplies to carry.

Question 28

An example of a suitable key performance indicator (KPI)for the objective of producing purchase orders that are accurate and correctly authorised is:

A)# of purchases from approved suppliers.
B)# of requester complaints.
C)# of returns to suppliers.
D)$ of unauthorised payments.

Question 29

Normally,when the stock on hand drops down to the automatic reorder point:

A)A purchase request is generated automatically.
B)A purchase requisition is generated automatically.
C)A purchase order is generated automatically
D)All of the options are correct.

Question 30

Typically,when receiving goods in the expenditure cycle:

A)One should accept the delivery before recording goods received.
B)One should record goods received before accepting the delivery.
C)It doesn't matter whether accepting the delivery or the recording goods received comes first.
D)One should ensure that there is always an invoice attached with all goods received.

Question 31

In the order goods stage of the expenditure cycle,which of the following is designed to reduce the risk of collusion and fraud?

A)Purchase orders are raised only once each week.
B)The decision to purchase more goods or materials is made by the purchasing officer.
C)The person who places orders is different from the one who is responsible for maintenance of the list of approved suppliers.
D)Purchase order forms are pre-numbered.

Question 32

A blind copy of the purchase order,which is sent to the receiving department,cannot:

A)Help deterring employee theft of high-value income goods.
B)Help forcing the receiving clerk to actually count and examine the incoming goods.
C)Expedite the preparation of receiving reports.
D)be used for copying quantity and price information to the receiving report.

Question 33

Accumulation of purchase requests should be done when:

A)There is a potential to achieve a better price outcome by buying in bulk.
B)Transaction costs can be lower by a smaller number of larger orders.
C)Time is not critical for the items being purchased.
D)All of the options are correct.

Question 34

Which of the following operational decisions is part of the expenditure cycle?

A)Scheduling production to satisfy forecast demand.
B)Responding to customer queries.
C)Reviewing employee performance.
D)Deciding which supplier to use for a specific order.

Question 35

Typically,which of the following document set will be handled by the purchase requisition officer during the determination of demand for goods?

A)Inventory data and purchase order.
B)Purchase request and supplier data.
C)Sales data and inventory data.
D)Supplier data and sales data.

Question 36

An inventory management strategy where the goal is to time the ordering of goods so they arrive just before when they are to be used,so as to reduce inventory holding costs is referred to as:

A)BTI
B)JIT
C)ITB
D)JITI

Question 37

A company buys in finished product to sell on to customers.Which of the following descriptions is the best reason to use an ERP system to support the expenditure cycle?

A)Improved connections between purchasing and inventory departments.
B)Centralised database.
C)Tighter linkages between demand and supply function.
D)Electronic transmission of purchase orders to suppliers.

Question 38

With regards to operational decisions,which of the following is NOT true?

A)Operational decisions in the expenditure cycle can be made by middle management.
B)Operational decisions in the expenditure cycle can be made by operational staff.
C)Operational decisions in the expenditure cycle create the policy framework within which the cycle operates.
D)Operational decisions in the expenditure cycle relate only to a specific instance of the process.

Question 39

When deciding which suppliers provide the best quality and service at the best price:

A)There is often a trade-off between price,quality and service.
B)The overall business strategy of the organisation is not a concern.
C)The type of product being procured is not a concern.
D)The greatest focus should be placed on price.

Question 40

Which of the following sequence in the expenditure cycle is correct?

A)collect requests for goods -> create purchase requisition -> choose the supplier -> create the purchase order
B)collect requests for goods -> choose the supplier -> create purchase requisition -> create the purchase order
C)create purchase requisition -> collect requests for goods -> choose the supplier -> create the purchase order
D)create the purchase order -> collect requests for goods -> choose the supplier -> create purchase requisition

Question 41

When approving payments,an accounts payable clerk needs to examine:

A)Purchase order information
B)Receiving reports
C)Supplier information
D)All of the options are correct.

Question 42

Give at least three examples of operation level decisions in the expenditure cycle.

Question 43

The types of counts and checks conducted during receiving goods will vary depending on the ________.

A)Availability of the receiving clerk.
B)The corporate policy on how often incoming goods should be checked.
C)Volume and value of goods received.
D)All of the options are correct.

Question 44

What are the risks associated with the purchasing phase when it is not correctly managed?

Question 45

Give at least three examples of strategy level decisions in the expenditure cycle.

Question 46

Discuss how ERP systems can provide benefits to the expenditure cycle.

Question 47

To check that there was a purchase order placed for the goods,goods receiving staff should check the following except:

A)The purchase number is valid.
B)The goods and supplier listed on the purchase order approximate those on the delivery document.
C)The goods listed on that purchase order have not been received already.
D)The price on the purchase order agrees with the price on the delivery document.

Question 48

Which of the following is NOT a KPI that can be used to evaluate the objective "To ensure goods are received in a timely fashion and both the quality and quantity of goods delivered are checked before acceptance"?

A)Number of quality complaints.
B)Number of requester complaints.
C)Number of returns to suppliers.
D)Number of erroneous receiving reports.

Question 49

Which of the following is NOT a KPI that can be used to evaluate the objective "To ensure payments made to suppliers are both timely and accurate"?

A)Number of purchases from approved suppliers.
B)Financial delegations compliance.
C)Average payment time.
D)Number of supplier complaints.

Question 50

Describe the objectives of the accounts payable phase of the expenditure cycle and how these objectives can be achieved.

Question 51

Which of the following is NOT a KPI that can be used to evaluate the objective "To produce purchase orders that are accurate and appropriately authorised"?

A)Number of purchases from unapproved suppliers
B)Number of supplier complaints
C)Number of accounts payable adjustments
D)Discounts claimed/overlooked

Question 52

What are the strategic implications of the expenditure cycle?

Question 53

What are the risks associated with the purchasing phase when it is not correctly managed?

Question 54

Discuss how organisations behave differently when pursuing a cost leadership strategy and a product differentiation strategy.

Question 55

A discount should only be taken where:

A)Cash flow is sufficient to support the early payment.
B)The discount offered is a reasonable inducement.
C)Corporate policy allows discounts to be taken.
D)All of the options are correct.

Question 56

Give at least five KPI to measure the performance of the objective "To ensure payments made to suppliers are both timely and accurate".

Question 57

An example of a suitable key performance indicator (KPI)for the objective of ensuring payments are made to suppliers are timely and accurate is:

A)$ overpayments
B)# of quality complaints
C)# of requester complaints
D)# of accounts payable adjustments

Question 58

Describe the objectives of the purchasing phase of the expenditure cycle and how these objectives can be achieved.

Question 59

To prevent employees from receiving kickbacks in the ordering process,an organisation can do the following except:

A)Enforce job rotation.
B)Enforce annual leave.
C)Enforce corporate gift policies.
D)Enforce the use of pre-approved suppliers.