Deck 5: The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures

Question 1

Proper segregation of duties requires that the responsibility approving a payment be separated from posting to the cash disbursements journal.

Answer 1

True

Question 2

When a trading partner agreement is in place,the traditional three way match may be eliminated.

Answer 2

True

Question 3

An automated cash disbursements system can yield better cash management since payments are made on time.

Answer 3

True

Question 4

Permitting warehouse staff to maintain the only inventory records violates separation of duties.

Question 5

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

Question 6

Inventory control should be located in the warehouse.

Question 7

One reason for authorizing purchases is to enable efficient inventory management.

Question 8

If accounts payable receives an invoice directly from the supplier it needs to be reconciled with the purchase order and receiving report.

Question 9

In a voucher system,the sum of all unpaid vouchers in the voucher register equals the firm's total voucher payable balance.

Question 10

A purchasing system that employs electronic data interchange does not use a purchase order.

Question 11

Authorization for a cash disbursement occurs in the cash disbursement department upon receipt of the supplier's invoice.

Question 12

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

Question 13

A three way match involves a purchase order,a purchase requisition,and an invoice.

Question 14

Inspection of shipments in the receiving department would be improved if the documentation showed the value of the inventory.

Question 15

A major risk exposure in the expenditure cycle is that accounts payable may be overstated at the end of the accounting year.

Question 16

Authorization of purchases in a merchandising firm occurs in the inventory control department.

Question 17

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

Question 18

The accounts payable department reconciles the accounts payable subsidiary ledger to the control account.

Question 19

Supervision in receiving is intended to reduce the theft of assets.

Question 20

The use of inventory reorder points suggests the need to obtain specific authorization.

Question 21

The check digit control will provide control over accessing the wrong accounts.

Question 22

The open purchase order file in the purchasing department is used to determine

A) the quality of items a vendor ships
B) the best vendor for a specific item
C) the orders that have not been received
D) the quantity of items received

Question 23

When purchasing inventory,which document usually triggers the recording of a liability?

A) purchase requisition
B) purchase order
C) receiving report
D) supplier's invoice

Question 24

The purpose of the purchase requisition is to

A) order goods from vendors
B) record receipt of goods from vendors
C) authorize the purchasing department to order goods
D) bill for goods delivered

Question 25

The accounts payable clerk is responsible for updating the AP Control accounts to reflect each vendor liability.

Question 26

In a merchandising firm,authorization for the purchase of inventory is the responsibility of

A) inventory control
B) purchasing
C) accounts payable
D) cash disbursements

Question 27

The inventory procurement process begins with the purchasing clerk preparing a purchase order.

Question 28

The financial value of a purchase is determined by reviewing the

A) packing slip
B) purchase requisition
C) receiving report
D) supplier's invoice

Question 29

The receiving report is used to

A) accompany physical inventories to the storeroom or warehouse
B) advise the purchasing department of the dollar value of the goods delivered
C) advise general ledger of the accounting entry to be made
D) advise the vendor that the goods arrived safely

Question 30

When goods are received,the receiving clerk sends copies of the receiving report to the inventory control clerk and the AP clerk.

Question 31

The purchase order

A) is the source document to make an entry into the accounting records
B) indicates item description,quantity,and price
C) is prepared by the inventory control department
D) is approved by the end-user department

Question 32

The reason that a blind copy of the purchase order is sent to receiving is to

A) inform receiving when a shipment is due
B) force a count of the items delivered
C) inform receiving of the type,quantity,and price of items to be delivered
D) require that the goods delivered are inspected

Question 33

All of the following departments have a copy of the purchase order except

A) the purchasing department
B) the receiving department
C) accounts payable
D) general ledger

Question 34

The receiving report is prepared by the vendor to provide evidence that the purchase order was received.

Question 35

Which document is least important in determining the financial value of a purchase?

A) purchase requisition
B) purchase order
C) receiving report
D) supplier's invoice

Question 36

When a copy of the receiving report arrives in the purchasing department,it is used to

A) adjust perpetual inventory records
B) record the physical transfer of inventory from receiving to the warehouse
C) analyze the receiving department's process
D) recognize the purchase order as closed

Question 37

In a merchandising firm,authorization for the payment of inventory is the responsibility of

A) inventory control
B) purchasing
C) accounts payable
D) cash disbursements

Question 38

The warehouse is responsible for updating the inventory subsidiary ledger.

Question 39

The purpose of the receiving report is to

A) order goods from vendors
B) record receipt of goods from vendors
C) authorize the purchasing department to order goods
D) bill for goods delivered

Question 40

The purpose of the purchase order is to

A) order goods from vendors
B) record receipt of goods from vendors
C) authorize the purchasing department to order goods
D) approve payment for goods received

Question 41

To maintain a good credit rating and to optimize cash management,cash disbursements should arrive at the vendor's place of business

A) as soon as possible
B) on the due date
C) on the discount date
D) by the end of the month

Question 42

The major risk exposures associated with the receiving department include all of the following except

A) goods are accepted without a physical count
B) there is no inspection for goods damaged in shipment
C) inventories are not secured on the receiving dock
D) the audit trail is destroyed

Question 43

In a firm with proper segregation of duties,adequate supervision is most critical in

A) purchasing
B) receiving
C) accounts payable
D) general ledger

Question 44

The document which will close the open purchase requisition file is the

A) purchase order
B) vendor invoice
C) receiving report
D) none of the above

Question 45

Usually the open voucher payable file is organized by

A) vendor
B) payment due date
C) purchase order number
D) transaction date

Question 46

Which of the following statements is not correct?

A) the voucher system is used to improve control over cash disbursements
B) the sum of the paid vouchers represents the voucher payable liability of the firm
C) the voucher system permits the firm to consolidate payments of several invoices on one voucher
D) many firms replace accounts payable with a voucher payable system

Question 47

The cash disbursement clerk performs all of the following tasks except

A) reviews the supporting documents for completeness and accuracy
B) prepares checks
C) signs checks
D) marks the supporting documents paid

Question 48

The documents in a voucher packet include all of the following except

A) a check
B) a purchase order
C) a receiving report
D) a supplier's invoice

Question 49

In regards to the accounts payable department,which statement is not true?

A) the purchase requisition shows that the transaction was authorized
B) the purchase order proves that the purchase was required
C) the receiving report provides evidence of the physical receipt of the goods
D) the supplier's invoice indicates the financial value of the transaction

Question 50

Because of time delays between receiving inventory and making the journal entry

A) liabilities are usually understated
B) liabilities are usually overstated
C) liabilities are usually correctly stated
D) none of the above

Question 51

In the expenditure cycle,general ledger does not

A) post the journal voucher from the accounts payable department
B) post the account summary from inventory control
C) post the journal voucher from the purchasing department
D) reconcile the inventory control account with the inventory subsidiary summary

Question 52

Firms can expect that proper use of a valid vendor file will result in all of the following benefits except

A) purchasing agents will be discouraged from improperly ordering inventory from related parties
B) purchases from fictitious vendors will be detected
C) the most competitive price will be obtained
D) the risk of purchasing agents receiving kickbacks and bribes will be reduced

Question 53

Of the following duties,it is most important to separate

A) warehouse from stores
B) warehouse from inventory control
C) accounts payable and accounts receivable
D) purchasing and accounts receivable

Question 54

In a real-time processing system with a high number of transactions,the best and most practical control over cash disbursements is to have

A) all checks manually signed by the treasurer
B) all checks signed by check-signing equipment
C) checks over a certain dollar amount manually signed by the treasurer
D) checks over a certain dollar amount manually signed by the cash disbursements clerk

Question 55

Goods received are inspected and counted to

A) determine that the goods are in good condition
B) determine the quantity of goods received
C) preclude payment for goods not received or received in poor condition
D) all of the above

Question 56

When a cash disbursement in payment of an accounts payable is recorded

A) the liability account is increased
B) the income statement is changed
C) the cash account is unchanged
D) the liability account is decreased

Question 57

When searching for unrecorded liabilities at the end of an accounting period,the accountant would search all of the files except

A) the purchase requisition file
B) the cash receipts file
C) the purchase order file
D) the receiving report file

Question 58

The receiving department is not responsible to

A) inspect shipments received
B) count items received from vendors
C) order goods from vendors
D) safeguard goods until they are transferred to the warehouse

Question 59

In a computerized system that uses an economic order quantity (EOQ)model and the perpetual inventory method,who determines when to reorder inventory?

A) the inventory control clerk
B) the purchasing department
C) the vendor
D) the computer system

Question 60

Authorization for payment of an accounts payable liability is the responsibility of

A) inventory control
B) purchasing
C) accounts payable
D) cash disbursements

Question 61

Which internally generated document should be compared to the supplier's invoice to verify the price of an item?

Question 62

Why should the copy of a purchase order,which is sent to receiving,be a "blind" copy?

Question 63

List specific jobs that should be segregated in the cash disbursements system.

Question 64

What internal accounting control(s)would be the most effective in preventing a storekeeper from taking inventory home at night? When shortages become apparent,he claims the goods were never received.

Question 65

Describe an internal control procedure that would prevent payment of a invoice for goods that were never delivered.

Question 66

What is(are)the purpose(s)of maintaining a valid vendor file?

Question 67

What type of error or fraud might happen if suppliers' invoices are not compared to purchase orders or to receiving reports before payment?

Question 68

Copies of a purchase order are sent to all of the following except

A) inventory control
B) receiving
C) general ledger
D) accounts payable

Question 69

Describe an internal control procedure that would prevent issuing two checks in payment of the same invoice.

Question 70

A supplier invoice

A) is included with the goods
B) shows what was ordered even if all was not shipped
C) is sent by vendor to accounts payable
D) none of the above

Question 71

Explain why supervision is so important in the receiving department.

Question 72

The cash disbursement function is

A) part of accounts payable
B) an independent accounting function
C) a treasury function
D) part of the general ledger department

Question 73

Describe an internal control procedure that would detect that a vendor overcharged for goods delivered.

Question 74

Which internally generated document should be compared to the supplier's invoice to verify the quantity being billed for?

Question 75

The receiving report

A) is used to update the actual cost inventory ledger
B) accompanies the goods to the storeroom
C) is sent to general ledger
D) is returned to the vendor to acknowledge receipt of the goods

Question 76

If a company uses a standard cost system,inventory records can be updated from the

A) vendor invoice
B) purchase order
C) receiving report
D) purchase requisition

Question 77

If a company uses an actual cost system,inventory records can first be updated from the

A) vendor invoice
B) purchase order
C) receiving report
D) purchase requisition

Question 78

Name two major benefits of automating the purchasing effort.

Question 79

What type of error or fraud might happen if the accounts payable ledger is not periodically reconciled to the control account in the general ledger?

Question 80

List specific jobs that should be segregated in the purchases processing system.