Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate control procedures over the invoicing function allow goods to be invoiced that are not shipped. The inadequate control procedures could cause an:
A) understatement of revenues, receivables and inventory.
B) overstatement of revenues and receivables, and an understatement of inventory.
C) understatement of revenues and receivables, and an overstatement of inventory.
D) overstatement of revenues, receivables and inventory.

Question

Quizplus · Accepted Answer

If goods are invoiced but not shipped, revenues and receivables will be overstated because they are recorded without an actual sale. Inventory will be understated because the goods are still in stock but are not accounted for properly.

Alpha Company Uses Its Sales Invoices for Posting Perpetual Inventory