Question 1

Which of the following statements describes a receiving report?

Accepted Answer

A receiving report is a document used to confirm that goods have been received in good condition and match the order placed with a supplier. It is typically created by the recipient of the goods and is used to support the processing of an invoice and payment for the goods received. Options A, B, and D do not accurately describe a receiving report.

Question 2

Which of the following should the purchasing agent NOT be able to do?

Accepted Answer

The purchasing agent should not be responsible for approving payments as this could create a conflict of interest and allow for potential fraud or misuse of funds. This responsibility should be delegated to a separate individual or department to ensure proper checks and balances are in place.

Question 3

Petty cash is a fund containing a small amount of cash that is used to pay for minor expenditures.

Accepted Answer

Petty cash is indeed a fund containing a small amount of cash that is used to pay for minor expenditures.

Question 4

A receiving report should be matched with the supplier invoice before a payment to the supplier is approved.

Accepted Answer

Matching the receiving report with the supplier invoice ensures that the goods or services have been received and the quantities and prices are correct before making a payment. This helps to prevent overpayments, underpayments, or payments for goods or services that were not received.

Question 5

Which of the following statements describes a purchase order?

Accepted Answer

A purchase order is a document that is issued by a company to a supplier, requesting the purchase of goods or services. It outlines the details of the order, including the quantity and type of items, delivery dates, and payment terms. It serves as a legally binding agreement between the buyer and the supplier.

Question 6

A document authorizing a cash payment is a(n):

Accepted Answer

A voucher is a document authorizing a cash payment. It is commonly used in business transactions to initiate payments to vendors or other third parties. A check is a written order to a bank to pay a specific amount of money from a checking account. An invoice is a document providing a detailed description of goods or services provided and indicating the amount due for payment. A bill of lading is a legal document acknowledging the receipt of goods and specifying the terms and conditions of their shipment.

Question 7

A company check for payment must be signed by:

Accepted Answer

A company check must be signed by a person specifically authorized by the company, typically someone in a management position or with signatory authority. This helps ensure the security and legitimacy of the payment.

Question 8

The journal entry to replenish a petty cash fund includes a debit to the petty cash account and a credit to the expense account.

Accepted Answer

The journal entry to replenish a petty cash fund includes a debit to the expense account and a credit to the petty cash account. This reflects that the expense has been incurred and the petty cash fund needs to be reimbursed.

Question 9

Which of the following statements describes a voucher?

Accepted Answer

A voucher is a document that authorizes a payment to a supplier. It serves as supporting evidence for the payment made and often includes details such as the supplier name, date of transaction, amount paid, and any applicable terms and conditions of the purchase. Option A describes a purchase order, option B describes an invoice, and option C describes a receiving report.

Question 10

For good controls over cash payments, the company officer approving a payment voucher should be the same as the person who ordered the goods, to ensure that the correct amount of cash is paid.

Accepted Answer

While it is important for the company officer to review and approve the payment voucher, it is not necessary for them to be the same person who ordered the goods. This separation of duties can actually improve controls by preventing one person from having too much control over the cash handling process.

Question 11

In a system of good internal control, a payment to a supplier requires which documents for proper approval?

Accepted Answer

A system of good internal control requires that a payment to a supplier be properly approved with a receiving report, an invoice, and a purchase order. This ensures that the goods were received, the price was agreed upon, and the invoice is accurate. A journal entry and a bill of lading may be important for recording and tracking transactions, but they are not necessary for the approval of a payment to a supplier. A price catalog and the supplier's financial statements are not required for the approval of a payment.

Question 12

The journal entry to open a new petty cash fund includes a debit to the petty cash account and a credit to cash in bank.

Accepted Answer

This is correct. When opening a new petty cash fund, the petty cash account is debited and cash in bank is credited to show that money has been taken out of the main account and put into the petty cash fund.

Question 13

Which of the following should the purchasing agent NOT be able to do?

Accepted Answer

The purchasing agent should not be able to receive the goods as this can create a conflict of interest and allow for the potential of fraud or errors in the inventory system. It is recommended that a separate department or individual is responsible for receiving and inspecting goods.

Question 14

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

Accepted Answer

This separation of duties ensures that there is no opportunity for collusion or fraud, and provides a system of checks and balances to help prevent errors or irregularities.

Question 15

If a single person is authorized to both order goods and approve payments, the company may be defrauded in several ways. Which of the following scenarios would NOT be a possible consequence of this control weakness?

Accepted Answer

The scenario of the goods being damaged in shipment is not related to the control weakness of a single person being authorized to both order goods and approve payments. It is an operational risk that can happen regardless of the internal controls in place. The other scenarios are possible consequences of this control weakness as they create opportunities for the person to commit fraud or abuse their power for personal gain.

Question 16

Which of the following is the first step in the purchasing and payment process?

Accepted Answer

The first step in the purchasing and payment process is for the purchaser to send a purchase order to the supplier. This document outlines the details of the transaction including the products or services being ordered, the quantity, the price, and any other terms or conditions. Once the supplier receives the purchase order, they can prepare to fulfill the order and send an invoice to the purchaser.

Question 17

Cash in the bank is more liquid than a petty cash fund.

Accepted Answer

Petty cash is more liquid than cash in the bank because none of the bank controls are in place.

Question 18

Which of the following is NOT included in a voucher?

Accepted Answer

A voucher typically includes an approval signature, the invoice number, and a description of the goods or services being purchased. However, a check is not included in a voucher as it is a separate form of payment.

Question 19

Which of the following items is NOT required to be examined by the controller or treasurer before signing a check?

Accepted Answer

The controller or treasurer does not need to examine the journal entry before signing a check, as the journal entry is prepared by the accounting department after the transaction has already occurred. However, they should examine the invoice, purchase order, and receiving report to ensure that the payment is valid and accurate.

Question 20

Which of the following statements describes an invoice from a supplier?

Accepted Answer

An invoice from a supplier is a statement from the supplier showing the goods purchased and the amount due. It is not an order to purchase goods (A), a report showing the goods have been received in good condition (C), or a document authorizing a payment (D).

Quiz 7: Internal Control and Cash

Which of the following statements describes a receiving report?

Which of the following should the purchasing agent NOT be able to do?

Petty cash is a fund containing a small amount of cash that is used to pay for minor expenditures.

A receiving report should be matched with the supplier invoice before a payment to the supplier is approved.

Which of the following statements describes a purchase order?

A document authorizing a cash payment is a(n) :

A company check for payment must be signed by:

The journal entry to replenish a petty cash fund includes a debit to the petty cash account and a credit to the expense account.

Which of the following statements describes a voucher?

For good controls over cash payments, the company officer approving a payment voucher should be the same as the person who ordered the goods, to ensure that the correct amount of cash is paid.

In a system of good internal control, a payment to a supplier requires which documents for proper approval?

The journal entry to open a new petty cash fund includes a debit to the petty cash account and a credit to cash in bank.

Which of the following should the purchasing agent NOT be able to do?

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

If a single person is authorized to both order goods and approve payments, the company may be defrauded in several ways. Which of the following scenarios would NOT be a possible consequence of this control weakness?

Which of the following is the first step in the purchasing and payment process?

Cash in the bank is more liquid than a petty cash fund.

Which of the following is NOT included in a voucher?

Which of the following items is NOT required to be examined by the controller or treasurer before signing a check?

Which of the following statements describes an invoice from a supplier?