Question 1

Describe the two methods to manage accounts receivable.

Accepted Answer

The answer of Describe the two methods to manage accounts...

Question 2

Suppose management wanted to increase the speed of processing customer payments.One way to speed up payment transaction processing is to

Accepted Answer

Using a FEDI (Financial Electronic Data Interchange) allows for electronic transmission of payment information between the buyer and seller, significantly reducing processing time compared to traditional paper-based methods. This would be the most feasible option for increasing the speed of processing customer payments. The other options of using JEDI analysis software, eliminating credit sales, or extending credit offered to customers may have a negligible impact on payment processing time.

Question 3

Discuss the advantage and disadvantage of the open-invoice method.

Accepted Answer

The answer of Discuss the advantage and disadvantage of the...

Question 4

Which is the best control to prevent invoicing customers for more than the actual quantity shipped?

Accepted Answer

Using the information from the packing slip ensures that the quantity billed reflects the actual quantity that was shipped to the customer. The packing slip is a document that is generated when the goods are being prepared for shipment and it indicates the products and quantities that are being sent to the customer. By using this information, the invoice can be prepared accurately and the risk of invoicing for more than the actual quantity shipped is minimized.

Question 5

The cashier deposits checks for Benedek Incorporated and also prepares payments to vendors.Of the following,who is best able to reconcile the bank statement to Benedek's records on a regular basis?

Accepted Answer

The internal audit department is responsible for assuring the accuracy and reliability of financial records, including reconciling bank statements to company records. As the cashier is responsible for both depositing checks and preparing payments, there is a potential conflict of interest, and it is best to have a separate department handle the reconciliation. The treasurer is responsible for managing the company's financial resources, but may not have the same level of familiarity with the day-to-day financial transactions as the internal audit department. The external auditor is not involved in regular reconciliations and is brought in periodically to review the company's financial statements.

Question 6

Separating the shipping and billing functions is designed to reduce the threat of

Accepted Answer

The answer of Separating the shipping and billing functions is...

Question 7

A(n)________ system prepares and mails monthly statements to customers throughout the entire month,instead of just at the end of the month.

Accepted Answer

Cycle billing is a system where monthly statements are prepared and mailed to customers throughout the month based on their account cycle. This means that customers receive their statements at different times of the month instead of everyone receiving their statements at the end of the month. This helps to evenly distribute the workload of preparing and mailing statements, and can also help customers manage their cash flow and payments.

Question 8

Segregation of duties controls dictates that the collection and recording functions be kept separate from each other.However,the accounts receivable department needs to know when customers pay their invoices.What is a solution to this potential internal control problem?

Accepted Answer

Establishing a lockbox arrangement with a bank allows for customer payments to be collected and deposited directly into a designated account without passing through the organization's mailroom. This reduces the risk of theft and ensures timely processing of payments, while also separating the collection and recording functions. Having customers send a remittance advice with their payment provides valuable information to the accounts receivable department, such as the invoice number and amount paid, which helps to reconcile customer accounts. Finally, having mailroom personnel prepare a remittance list allows for efficient communication of customer payments to the accounts receivable department while maintaining the segregation of duties between collection and recording functions. All of these options provide solutions to the potential internal control problem.

Question 9

Upon notification from the receiving department that the goods have been returned,the manager issues a(n)________ ,which authorizes the adjustment of the customer's account.

Accepted Answer

When goods are returned by the customer, a credit memo is issued to authorize the adjustment of the customer's account. This credit memo shows that the customer's account has been credited for the returned goods. It is also a record of the transaction for the seller's accounting system. The other options, debt memo, adjusting entry, and bill of lading, are not applicable in this scenario.

Question 10

Discuss ways in which technology can be used to streamline cash collections.

Accepted Answer

The answer of Discuss ways in which technology can be...

Question 11

The shipping department at Eka Toys follows policies that determine which carrier will deliver orders according to the size,weight,and destination of the shipment.It maintains standing agreements with shippers that specify legal responsibility for the shipment while it is in transit.The terms of the shipping agreements are documented on

Accepted Answer

The terms of shipping agreements, including legal responsibility for the shipment while it is in transit, are documented on bills of lading. Picking tickets and packing slips are documents used internally by the shipping department for tracking and organizing orders, while RFID tags are used for inventory management and tracking shipments.

Question 12

All of the following edit checks for online editing of accounts receivable transactions would probably be included except

Accepted Answer

Check digit verification is not typically necessary for the amount of a sale, as it is unlikely that the amount would be entered incorrectly due to its significance. The other edit checks listed (validity checks, closed loop verification, and field checks) are commonly used to ensure accuracy and completeness of accounts receivable transactions.

Question 13

What is image processing technology and how can it help companies improve the efficiency and effectiveness of managing their customer accounts?

Accepted Answer

The answer of What is image processing technology and how...

Question 14

Which of the following is not a threat to the revenue cycle billing process?

Accepted Answer

Loss of customers may affect the overall revenue of a company, but it does not directly affect the revenue cycle billing process. The other options - accounts receivable errors, failure to bill, and inaccurate credit memos - can all lead to mistakes in the billing process and ultimately result in lost revenue.

Question 15

A monthly statement sent to customers serves a control purpose by

Accepted Answer

A monthly statement sent to customers provides an opportunity for customers to verify the balance owed and activity on the account, which helps to ensure accuracy and prevent errors or fraudulent activity. While options B, C, and D may also be true to some extent, option A is the primary control purpose served by a monthly statement.

Question 16

How can Electronic Data Interchange (EDI)facilitate the billing and accounts receivable process?

Accepted Answer

The answer of How can Electronic Data Interchange (EDI)facilitate the...

Question 17

A document typically encountered in the revenue cycle that is both an output document and a source document is the

Accepted Answer

A sales invoice is both an output document (as it is sent to the customer) and a source document (as it is used to record the sale in the accounting system). The other options are either only output documents (customer purchase order, packing slip) or only source documents (sales order).

Question 18

Describe cycle billing and identify how an organization might benefit by using cycle billing.

Accepted Answer

The answer of Describe cycle billing and identify how an...

Question 19

The accounts receivable clerk destroys all invoices for sales made to family and friends and does not record the sales in the accounts receivable subsidiary ledgers.The family and friends usually give the clerk cash as a "thank you." Which procedure will not prevent or detect this fraud?

Accepted Answer

Sending monthly statements to all customers with balances owed is not likely to prevent or detect this type of fraud since the clerk is intentionally not recording the sales in the accounts receivable subsidiary ledgers. Reconciling sales invoices to the total debits to accounts receivable subsidiary ledgers, sequentially prenumbering all invoices and preparing a sequence check at the end of each day, and reconciling the accounts receivable control account to the accounts receivable subsidiary ledger are all procedures that could help prevent or detect this type of fraud.

Question 20

Which of the following is not one of the controls when customer payments are commingled with other mail?

Accepted Answer

Requiring the controller to be personally present when mail is received and opened is not a common control when customer payments are commingled with other mail. However, it may still be a valid control in certain organizations. A, B, and C are all common controls to help prevent fraud or errors when customer payments are received and opened.

Quiz 12: The Revenue Cycle: Sales to Cash Collections