Deck 10: Salles - Collection Process

Question 1

Which step in the sales/collection process typically occurs on a monthly basis only?

A) Take customer order.
B) Write off accounts receivable.
C) Ship merchandise.
D) Bill customer.

Answer 1

D

Question 2

In Porter's value chain, "infrastructure" includes: (i) control systems, (ii) company culture.

A) i only.
B) ii only.
C) Both i and ii.
D) Neither i nor ii.

Answer 2

C

Question 3

In Porter's value chain, all of the following are primary activities except:

A) Information technology.
B) Service.
C) Inbound logistics.
D) Marketing and sales.

Answer 3

A

Question 4

In Porter's value chain, receiving and storing raw materials are referred to as:

A) Procurement.
B) Operations.
C) Inbound logistics.
D) Infrastructure.

Question 5

Lisa paid her outstanding accounts receivable to FTG Corporation via regular mail. Which of the following documents did she include in the envelope: (i) check, (ii) packing list, (iii) remittance advice?

A) i and ii only.
B) ii and iii only.
C) i and iii only.
D) i, ii and iii.

Question 6

As part of the sales/collection process, a ___ typically originates inside an organization but does not remain there.

A) Bill of lading.
B) Customer order.
C) Picking list.
D) Write-off document.

Question 7

In a company that sells goods and services on credit, which of the following steps in the sales/collection process may be unnecessary?

A) Approve credit.
B) Bill the customer.
C) Ship merchandise.
D) Collect payment.

Question 8

In Porter's value chain, all of the following are associated with infrastructure except:

A) Employee recruiting.
B) Organizational structure.
C) Control systems.
D) Company culture.

Question 9

In a typical sales/collection process, which of the following duties should be separated for strong internal control: (i) taking an order and granting credit, (ii) shipping merchandise and collecting cash?

A) i only.
B) ii only.
C) Both i and ii.
D) Neither i nor ii.

Question 10

Which of the following is a primary activity in Porter's value chain?

A) Procurement.
B) Information technology.
C) Outbound logistics.
D) Infrastructure.

Question 11

Which of the following best contrasts a picking list and a packing list?

A) The shipping department uses only one document.
B) The warehouse uses the packing list, but not the picking list.
C) Picking lists are only required when selling on credit.
D) The customer receives a packing list, but not a picking list.

Question 12

In the sales/collection process, orders should be filled based on:

A) The quantity of inventory on hand.
B) The customer's credit.
C) The potential for future sales.
D) The importance of the customer.

Question 13

Lisa purchased merchandise on credit from FTG Corporation. When she paid the bill, she indicated that the check should be applied to Invoices 123 and 431. What system for recording cash collections does FTG use?

A) Accrual.
B) Open invoice.
C) Balance forward.
D) Cannot be determined from the information given.

Question 14

Porter's value chain comprises ___ activities and ___ activities.

A) Sales, procurement.
B) Sales, collection.
C) Primary, secondary.
D) Primary, support.

Question 15

FTG Corporation accepts credit cards in payment from its customers, but does not extend credit itself. Which of the following documents is least likely to be required in FTG's sales/collection process?

A) Remittance advice.
B) Deposit slip.
C) Bill of lading.
D) Packing list.

Question 16

Which of the following documents is typically associated with the first step in the sales/collection process?

A) Invoice.
B) Order.
C) Check.
D) Remittance advice.

Question 17

The shipping department utilizes all of the following documents except:

A) Customer order.
B) Picking list.
C) Packing list.
D) Bill of lading.

Question 18

Which of the following steps in the sales/collection process occurs first?

A) Bill the customer.
B) Collect payment.
C) Ship the product.
D) Approve credit.

Question 19

The first step in the sales/collection process is:

A) Identify a market need.
B) Take a customer's order.
C) Evaluate a customer's credit.
D) Verify total inventory on hand.

Question 20

Which step in the sales/collection process immediately follows taking a customer order?

A) Evaluate credit.
B) Fill the order.
C) Ship the product.
D) Verify inventory availability.

Question 21

To promote strong internal control, which of the following documents should be matched prior to billing a customer?

A) Customer invoice and customer order.
B) Bill of lading and customer order.
C) Bill of lading and customer invoice.
D) Customer order and customer invoice.

Question 22

Using information technology in the sales/collection process is least likely to address any form of ___ risk.

A) Financial.
B) Operational.
C) Strategic.
D) Hazard.

Question 23

As a form of internal control, insuring merchandise is most closely associated with which step in the sales/collection process?

A) Step one.
B) Step two.
C) Step three.
D) Step four.

Question 24

As a form of internal control, which of the following documents should be pre-numbered?

A) Deposit slip.
B) Customer order.
C) Remittance advice.
D) Picking list.

Question 25

Which of the following internal controls is primarily corrective?

A) Insuring goods in transit.
B) Numbering documents sequentially.
C) Separation of duties.
D) Conducting a cash-only business.

Question 26

Staff at FTG Corporation use a form when taking customer orders. The form could be generated with: (i) relational database software, (ii) web development software.

A) i only.
B) ii only.
C) Both i and ii.
D) Neither i nor ii.

Question 27

The following paragraph applies to Questions 45 through 50:
The San Gabriel Valley chapter of the Institute of Management Accountants sponsors four computer seminars each year: Access, Excel, PowerPoint and QuickBooks. Participants can sign up for any or all of the seminars; pricing varies with the number of seminars and with the participant's membership and professional status. For example, a student member of the IMA can sign up for one seminar for $30, or all four for $100. A non-member of the IMA, whether a student or not, would pay $50 for one seminar or $150 for all four. Elliot receives registrations via e-mail and collects payment at the beginning of each seminar.
A Level Zero data flow diagram of the preceding process would include ___ numbered circles.

A) One.
B) Two.
C) Three.
D) Some other number.

Question 28

The following paragraph applies to Questions 45 through 50:
The San Gabriel Valley chapter of the Institute of Management Accountants sponsors four computer seminars each year: Access, Excel, PowerPoint and QuickBooks. Participants can sign up for any or all of the seminars; pricing varies with the number of seminars and with the participant's membership and professional status. For example, a student member of the IMA can sign up for one seminar for $30, or all four for $100. A non-member of the IMA, whether a student or not, would pay $50 for one seminar or $150 for all four. Elliot receives registrations via e-mail and collects payment at the beginning of each seminar.
A flowchart of the preceding process would include how many of this symbol:

A) Zero.
B) One.
C) Two.
D) Three.

Question 29

The following paragraph applies to Questions 45 through 50:
The San Gabriel Valley chapter of the Institute of Management Accountants sponsors four computer seminars each year: Access, Excel, PowerPoint and QuickBooks. Participants can sign up for any or all of the seminars; pricing varies with the number of seminars and with the participant's membership and professional status. For example, a student member of the IMA can sign up for one seminar for $30, or all four for $100. A non-member of the IMA, whether a student or not, would pay $50 for one seminar or $150 for all four. Elliot receives registrations via e-mail and collects payment at the beginning of each seminar.
Column headings in a flowchart of the preceding process would include: (i) Elliot, (ii) student IMA member, (iii) non-member?

A) i only.
B) ii only.
C) iii only.
D) i, ii and iii.

Question 30

Which of the following internal controls will ensure that fraud does not exist in the sales/collection process: (i) document matching, (ii) separation of duties?

A) i only.
B) ii only.
C) Both i and ii.
D) Neither i nor ii.

Question 31

Which form of operational risk is most likely to increase with the use of information technology in the sales/collection process?

A) Systems risk.
B) Human error risk.
C) Market risk.
D) Business strategy risk.

Question 32

Web development software would most likely be used to complete which step in the sales/collection process?

A) Take customer order.
B) Deposit cash in bank.
C) Collect payment.
D) Write off bad debts.

Question 33

Which form of information technology is most appropriate for evaluating customer credit?

A) Spreadsheet.
B) Relational database.
C) General ledger software.
D) Information technology should not be used to evaluate customer credit.

Question 34

In an organization with strong control over its sales/collection process, only the accounting department would use:

A) Enterprise resource planning software.
B) General ledger software.
C) Relational database software.
D) Spreadsheet software.

Question 35

The following paragraph applies to Questions 45 through 50:
The San Gabriel Valley chapter of the Institute of Management Accountants sponsors four computer seminars each year: Access, Excel, PowerPoint and QuickBooks. Participants can sign up for any or all of the seminars; pricing varies with the number of seminars and with the participant's membership and professional status. For example, a student member of the IMA can sign up for one seminar for $30, or all four for $100. A non-member of the IMA, whether a student or not, would pay $50 for one seminar or $150 for all four. Elliot receives registrations via e-mail and collects payment at the beginning of each seminar.
A flowchart of the preceding process would be organized in ___ columns.

A) One.
B) Two.
C) Three.
D) More than three.

Question 36

The following paragraph applies to Questions 45 through 50:
The San Gabriel Valley chapter of the Institute of Management Accountants sponsors four computer seminars each year: Access, Excel, PowerPoint and QuickBooks. Participants can sign up for any or all of the seminars; pricing varies with the number of seminars and with the participant's membership and professional status. For example, a student member of the IMA can sign up for one seminar for $30, or all four for $100. A non-member of the IMA, whether a student or not, would pay $50 for one seminar or $150 for all four. Elliot receives registrations via e-mail and collects payment at the beginning of each seminar.
A Level Zero data flow diagram of the preceding process would include ___ numbered rectangles.

A) One.
B) Two.
C) Three.
D) Some other number.

Question 37

Which of the following demonstrates the strongest internal control over the sales/collection process?

A) Cash receipts clerk reconciles the bank account daily.
B) A sales clerk approves customer credit for each transaction.
C) Invoices are compared to packing lists.
D) Remittance advices are sequentially numbered.

Question 38

Which form of information technology provides the strongest internal control over the sales/collection process?

A) Enterprise resource planning.
B) General ledger.
C) Relational database.
D) Cannot be determined from the information given.

Question 39

Which of the following internal control processes would most likely be completed using information technology?

A) Evaluating credit.
B) Document matching.
C) Sequential numbering.
D) Separation of duties.

Question 40

The following paragraph applies to Questions 45 through 50:
The San Gabriel Valley chapter of the Institute of Management Accountants sponsors four computer seminars each year: Access, Excel, PowerPoint and QuickBooks. Participants can sign up for any or all of the seminars; pricing varies with the number of seminars and with the participant's membership and professional status. For example, a student member of the IMA can sign up for one seminar for $30, or all four for $100. A non-member of the IMA, whether a student or not, would pay $50 for one seminar or $150 for all four. Elliot receives registrations via e-mail and collects payment at the beginning of each seminar.
A data flow diagram of the preceding process would include how many of this symbol:

A) Zero.
B) One.
C) Two.
D) More than two.

Question 41

The following scenario applies to 59 and 60:
Bonnie makes and sells her own jewelry over the Internet. A customer browses Bonnie's catalog online and fills out a sales order. The sales order is transmitted electronically to Bonnie, who checks her inventory for each item ordered. If the item is on hand, Bonnie packs it securely and ships it to the customer via a common carrier. If the item is not on hand, Bonnie e-mails the client with an expected shipment date; at that point, the customer must agree to wait until the expected shipment date or cancel the order. Bonnie encloses an invoice with all shipped merchandise; the client sends a check directly to Bonnie's bank for deposit. The bank reports all deposits to Bonnie on a weekly basis; Bonnie reconciles her bank account every day.
Flowchart creation
Create a flowchart that shows the interaction between Bonnie and her client based on the preceding scenario.

Question 42

Sales/collection steps
LCM Corporation completes the steps listed below in its sales/collection process. Number them according to the order in which they should occur; if an item is not part of the sales/collection process; mark it with an "X."
a. Customer remits cash to LCM
b. Customers complete an online form indicating what they want to buy
c. Develop a monthly sales budget
d. Hold a meeting for sales staff to introduce new products
e. Inventory is loaded on a truck for delivery to the customer
f. LCM prepares and sends invoices to clients
g. LCM's credit department authorizes the sale
h. Prepare the income statement
i. Staff in the warehouse assemble the goods for the customer
j. Write off bad debts.

Question 43

Documents
Several actions from the sales/collection process are listed below. Write the name of the sales/collection process document that most clearly applies to each item. If no document applies, write "none."
______ 1. Accounting department journalizes cash receipt
______ 2. Billing department requests client payment
______ 3. Cash receipts clerk sends receipts to bank
______ 4. Client prepares sequentially numbered document to pay bill
______ 5. Common carrier ships merchandise to customer
______ 6. Customer checks shipment contents for accuracy when received
______ 7. Customer files complaint against common carrier
______ 8. Sales clerk sends information to warehouse
______ 9. Sales manager compares actual sales to budget
______ 10. Warehouse employee assembles goods for packaging and delivery

Question 44

Internal controls
Several potential problems in the sales/collection process are listed below. In the space provided, indicate one internal control that would prevent/detect/correct the problem; do not use the same internal control more than once
______ 1. A burglar takes cash while the office is closed
______ 2. A customer is unwilling to pay his bill
______ 3. A fire destroys inventory in the warehouse
______ 4. A sales clerk records incorrect items on a customer order
______ 5. An accounting clerk records cash received on account by debiting cash and accounts receivable
______ 6. Items ordered are missing from a shipment, although they appear on the packing list
______ 7. Merchandise is damaged during shipment
______ 8. Sales and warehouse clerks arrange to ship merchandise to their friends
______ 9. The cash receipts clerk steals money from incoming mail
______ 10. The customer invoice is sent before goods are shipped

Question 45

The following scenario applies to 59 and 60:
Bonnie makes and sells her own jewelry over the Internet. A customer browses Bonnie's catalog online and fills out a sales order. The sales order is transmitted electronically to Bonnie, who checks her inventory for each item ordered. If the item is on hand, Bonnie packs it securely and ships it to the customer via a common carrier. If the item is not on hand, Bonnie e-mails the client with an expected shipment date; at that point, the customer must agree to wait until the expected shipment date or cancel the order. Bonnie encloses an invoice with all shipped merchandise; the client sends a check directly to Bonnie's bank for deposit. The bank reports all deposits to Bonnie on a weekly basis; Bonnie reconciles her bank account every day.
Data flow diagram creation
Create a data flow diagram that shows the interaction between Bonnie and her bank based on the preceding scenario.

Question 46

Sales/collection process: Fill in the blanks below according to the purpose of and steps in the sales/collection process.
a. The fundamental purpose of the sales/collection process is to ______ ______ and ______ to clients and to ______ ______ from them.
b. Take a customer's ______.
c. Process ______ ______ as necessary.
d. Collect ______.
e. Approve the customer's ______.
f. ______ the order based on approved ______.
g. ______ the product.
h. ______ the customer.

Question 47

Internal control evaluation
Several risks are paired with potential internal controls in the list below. Place an "X" in the appropriate column to indicate if the internal control addresses (prevents/detects/corrects) the risk with which it is paired.