Question 1

In order to meet the objectives of internal controls, individuals with authoritative responsibilities need to have access to the record keeping functions.

Accepted Answer

Separation of duties is a key principle in internal controls to prevent fraud and errors, meaning individuals with authoritative responsibilities should not have access to record-keeping functions.

Question 2

When the customer is billed, the accounts receivable records should be updated to reflect the decreased balance.

Accepted Answer

When a customer is billed, the accounts receivable balance increases, as it represents the amount owed by the customer to the company.

Question 3

A reconciliation should be prepared by the same person who is responsible for the recording function.

Accepted Answer

A reconciliation should be prepared by someone who is independent of the recording function to ensure accuracy and prevent potential fraud or errors. This helps to ensure proper checks and balances in accounting processes.

Question 4

A benefit of a company accounting for their documents in a numerical sequence is that it is much easier to see if a document or documents are missing.

Accepted Answer

Accounting for documents in a numerical sequence helps to identify if any document or documents are missing, as any gaps in the sequence can be easily recognized.

Question 5

When a sales order has been entered into the system, the customer's credit status must be checked.For existing customers, the sale on account should be approved only if the customer has exceeded their credit limit.

Accepted Answer

The sale on account should be approved only if the customer has not exceeded their credit limit.

Question 6

Record files related to sales can be organized by customer name or by the numerical sequence of the documents.

Accepted Answer

Sales records can be organized by customer name or document number for ease of access and retrieval.

Question 7

The individuals who are given the authority to establish sales prices, credit limits, and guidelines for accepting customers should be sure to keep most of the information confidential.

Accepted Answer

The answer of The individuals who are given the authority...

Question 8

Because different companies conduct business in different manners, there tends to be few similarities in the way the related business processes are carried out.

Accepted Answer

While companies may have unique aspects, many business processes are standardized across industries to ensure efficiency, compliance, and best practices.

Question 9

Effective and efficient internal control often takes up valuable management time that could otherwise be spent on attention to revenue growth and cost controls.

Accepted Answer

Effective and efficient internal control is designed to enhance management's ability to focus on revenue growth and cost controls by ensuring accurate financial reporting and safeguarding assets, thus supporting overall business objectives.

Question 10

Independent checks and reconciliations should be performed on a regular basis as part of the segregation of duties area of internal controls.

Accepted Answer

The answer of Independent checks and reconciliations should be performed...

Question 11

What a customer refers to as a purchase order is referred to as a sales order by the vendor.

Accepted Answer

A purchase order is created by the buyer to request goods or services, while the vendor refers to this request as a sales order from their perspective.

Question 12

If a vendors waits too long to send the bill to the customer due to the fact that it could cause a delay of the collection of the cash.

Accepted Answer

Delaying the billing process can lead to a delay in cash collection, as customers typically pay after receiving the bill.

Question 13

If a sales order comes from a new customer, it is necessary to evaluate the creditworthiness of that customer before the sale is approved.

Accepted Answer

It is important to evaluate the creditworthiness of a new customer before approving the sale to ensure that they will be able to pay for the goods or services. This helps to reduce the risk of non-payment and potential losses for the company.

Question 14

The existence of good internal controls do not ensure high sales and profits.

Accepted Answer

Good internal controls are important for preventing fraud, errors, and ensuring compliance, but they may not directly contribute to increasing sales and profits. Other factors such as market conditions, competitive landscape, and effective business strategies also play a crucial role in driving business growth.

Question 15

Even though most companies collect order data from customers, the manner of receiving order data seldom varies.

Accepted Answer

The manner of receiving order data can vary widely depending on the company's processes, technology, and customer preferences, such as online orders, phone orders, in-person orders, or through mobile apps.

Question 16

Sales processes need supporting practices such as credit checks and stock authorization.

Accepted Answer

Credit checks help to ensure that the customer has a reliable payment history and stock authorization ensures that there is enough inventory to meet demand. Both of these practices are important in supporting the overall sales process.

Question 17

Proper sales authorization control requires obtaining approval before processing an order and again before the order is shipped.

Accepted Answer

Proper sales authorization control requires obtaining approval at two critical points, before processing an order and again before the order is shipped, to ensure that the order is legitimate and authorized. This process helps to prevent fraud, errors, and unauthorized orders.

Question 18

Billing to the customer should take place prior to shipment so that the customer receives the bill before the merchandise arrives.

Accepted Answer

Billing typically occurs after shipment to ensure that the customer is charged for the correct items and quantities that were actually shipped.

Question 19

Whenever a sales order is received, it is necessary to check the inventory to make sure that the items ordered are in stock.If the items are in stock, a packing slip will be prepared.

Accepted Answer

The answer of Whenever a sales order is received, it...

Question 20

The internal control activity, related to the authorization of transactions, requires that only specific individuals within the company should have the authoritative responsibility for establishing sales prices and credit terms.

Accepted Answer

This is true as part of the authorization control activity. Only authorized individuals should be responsible for establishing sales prices and credit terms to ensure accuracy and consistency.

Quiz 8: Revenue and Cash Collection Processes