Question 1

In the revenue cycle, the internal control "limit access" applies to physical assets only.

Accepted Answer

The internal control of "limit access" applies to both physical assets and information, including access to computer systems, data, and documents.

Question 2

Determining that the AR balance states its net realizable value tests the management assertion of existence of occurrence.

Accepted Answer

Determining that the AR balance states its net realizable value tests the management assertion of valuation or accuracy, not existence or occurrence. Existence of occurrence relates to whether the AR balances actually exist and pertain to the entity.

Question 3

A remittance advice is a form of turn-around document.

Accepted Answer

A remittance advice is a document sent by a customer to a supplier indicating the invoice number and amount being paid, and it serves as a turn-around document since it provides information back to the supplier regarding the payment.

Question 4

A bill of lading is a request for payment for shipping charges.

Accepted Answer

A bill of lading is a legal document that serves as a receipt of shipment, a contract of carriage, and a document of title for goods. It does not request payment for shipping charges, but rather documents the details of the shipment, including the consignor and consignee, the destination, the type and quantity of goods being shipped, and any special handling instructions or requirements. The payment for shipping charges is generally negotiated separately between the shipper and the carrier.

Question 5

Sales return involves receiving, sales, credit, and billing departments, but not accounts receivable.

Accepted Answer

Sales return involves accounts receivable, as the customer may need to be credited for the returned goods and the accounts receivable department would need to process the credit. Therefore, all departments mentioned (receiving, sales, credit, billing, and accounts receivable) are involved in the sales return process.

Question 6

The bill of lading is a legal contract between the buyer and the seller.

Accepted Answer

The bill of lading is a legal contract between the carrier and the shipper, detailing the type, quantity, and destination of the goods being carried.

Question 7

Warehouse stock records are the formal accounting records for inventory.

Accepted Answer

The answer of Warehouse stock records are the formal accounting...

Question 8

The packing slip is also known as the shipping notice.

Accepted Answer

The packing slip is a document that lists the contents of a shipment, while the shipping notice is a document that alerts the recipient that a shipment is on its way.

Question 9

The cash receipts journal is a special journal.

Accepted Answer

The cash receipts journal is a type of special journal used to record all incoming cash transactions.

Question 10

In a computerized accounting system, segregation of functions refers to inventory control, accounts receivable, billing, and general ledger tasks.

Accepted Answer

The answer of In a computerized accounting system, segregation of...

Question 11

Sales orders should be prenumbered documents.

Accepted Answer

Sales orders should be prenumbered in order to maintain a sequential record of transactions and prevent any possible loss or duplication of orders.

Question 12

The principal source document in the sales order system is the sales order.

Accepted Answer

The sales order is the primary source document that initiates the sales order system. It contains information such as customer information, item information, quantity, price, terms, and delivery information. All further processes, such as fulfillment, shipping, and billing, depend on the accuracy and completeness of the sales order.

Question 13

Batch control continues through all stages of data processing.

Accepted Answer

Batch control refers to the process of controlling and tracking data batches as they move through various stages of data processing, from data entry to data output. This ensures that all data is processed accurately and completely, and that any errors or discrepancies are identified and corrected quickly. Batch control is an essential part of any data processing system, and it continues throughout the entire data processing cycle. Therefore, the statement "Batch control continues through all stages of data processing" is true.

Question 14

In most large organizations, the journal voucher file has replaced the formal general journal.

Accepted Answer

In many organizations, the journal voucher file has replaced the traditional general journal for recording transactions. This is because the use of journal vouchers allows for more efficient and streamlined recording and tracking of transactions. However, some organizations may still use formal general journals in addition to journal vouchers.

Question 15

Another name for the stock release form is the picking ticket.

Accepted Answer

The answer of Another name for the stock release form...

Question 16

In point of sale systems, authorization takes the form of validation of credit card charges.

Accepted Answer

Authorization in point of sale systems involves validating credit card charges to ensure that the payment method is valid and has sufficient funds to cover the purchase.

Question 17

In real-time processing systems, routine credit authorizations are automated.

Accepted Answer

Real-time processing systems automate routine credit authorizations so that they can be processed quickly and efficiently without human intervention.

Question 18

The purpose of the invoice is to bill the customer.

Accepted Answer

The invoice is a document that lists the products or services provided by the seller and the amount the customer owes for them. Its main purpose is to request payment from the customer for the goods or services received.

Question 19

If a customer submits a written purchase order, there is no need to prepare a sales order.

Accepted Answer

A purchase order is a document prepared by the customer requesting the purchase of goods or services, while a sales order is prepared by the seller confirming that the goods or services have been sold and will be delivered. Therefore, when a customer submits a purchase order, the seller still needs to prepare a sales order to confirm the sale and start the process of fulfilling the order.

Question 20

A written customer purchase order is required to trigger the sales order system.

Accepted Answer

A sales order system can be triggered by various means, not just a written customer purchase order. It can also be initiated through verbal agreements, online orders, or electronic purchase orders, depending on the company's sales process and policies.

Quiz 9: Auditing the Revenue Cycle