Question 1

A company check for payment must be signed by ________.

Accepted Answer

A company check must be signed by an employee who is specifically authorized by the company to make financial transactions. This could include the CFO, treasurer, or other designated individual. The company president or external auditor may not necessarily have the authority to sign checks. A bank employee would not typically be authorized to sign a company check.

Question 2

A streamlined process that bypasses paper documents altogether and in which computers of retailers communicate directly with the computers of suppliers to automate routine business transactions is known as ________.

Accepted Answer

This process is known as Electronic Data Interchange (EDI), which allows for the exchange of business documents between computers without the need for paper documents. Real Time Gross Settlement (RTGS) and Electronic Fund Transfer (EFT) relate to financial transactions, while Evaluated Receipts Settlement (ERS) is a method of automating invoicing and payment for goods received.

Question 3

Before sending the check for payment of goods, the controller should examine the payment pack. List the documents that are included in the payment pack and describe the information provided by each document.

Accepted Answer

The answer of Before sending the check for payment of...

Question 4

For the following situation, state whether it represents a strength or weakness in internal control and give the reason for your answer.
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Baker Auto Supply purchases merchandise inventory from A & B Company. The accountant places the order, verifies receipt of the merchandise, and records the transaction in the general journal.

Accepted Answer

The answer of For the following situation, state whether it...

Question 5

List the four steps, the proper order, of the purchasing and payment process.

Accepted Answer

The answer of List the four steps, the proper order,...

Question 6

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

Accepted Answer

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

Question 7

Evaluated Receipts Settlement is ________.

Accepted Answer

Evaluated Receipts Settlement (ERS) is a process where the invoice is generated automatically based on the comparison between receiving report and purchase order. It eliminates the need for a separate invoice processing step, compressing the payment approval process into a single step.

Question 8

Match each term with its description.
-Check

Accepted Answer

The answer of Match each term with its description.
-Check
...

Question 9

Which of the following items must be examined by the controller or treasurer before signing a check?

Accepted Answer

The purchase order tells the controller or treasurer what the company is buying and how much it costs, which helps ensure that the check is for a valid expense and that the amount paid matches the agreed-upon price. The ledger, confirmation report, and journal entry may also be reviewed but do not provide as much direct information about the specific payment being made.

Question 10

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

Accepted Answer

Cash in the bank and a petty cash fund are both considered highly liquid assets, but a petty cash fund is on hand and readily available for immediate use, making its liquidity essentially equivalent to cash in the bank.

Question 11

Match each term with its description.
-Invoice

Accepted Answer

An invoice is typically sent by the vendor to the purchaser after the goods or inventory have been shipped, detailing the quantities shipped, the prices, and the total amount owed by the purchaser.

Question 12

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

Accepted Answer

An invoice from a supplier is a statement or bill that shows the goods purchased and the amount due. It is a request for payment from the supplier to the purchaser. Options A, C, and D do not accurately describe an invoice from a supplier.

Question 13

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

Accepted Answer

The key to strong control over petty cash is to ensure that only one person serves as custodian at one time. This helps to prevent any discrepancies or fraudulent activities that could occur if multiple persons have access and responsibility for the same petty cash.

Question 14

In a good internal control system, which of the following sets of documents is required for proper approval of a payment to a supplier?

Accepted Answer

The best set of documents for proper approval of a payment to a supplier would include a receiving report (to confirm that goods or services have been received and are acceptable), an invoice (which details the products or services purchased and the cost), and a purchase order (which authorizes the purchase). Together, these documents provide a paper trail showing that the purchase was authorized, received, and invoiced properly. Options A and C both include a journal entry, which may be used to record the payment transaction but is not necessary for approval. Option D includes the supplier's financial statements, which are not pertinent to the specific payment transaction.

Question 15

Which of the following is NOT a reason why paying by check is an important internal control?

Accepted Answer

The purchasing agent reviewing the invoice or other evidence supporting the payment before signing the check is not specifically related to the check itself as an internal control mechanism. This action is part of the verification and approval process of transactions, which can occur independently of the payment method used.

Question 16

Which of the following statements describes a receiving report?

Accepted Answer

A receiving report is a document that confirms that goods have been received in good condition, as ordered. It is typically created by the recipient of goods and serves as a proof of delivery that can be used to authorize payment or reconcile invoices. It is not an order to purchase goods (A), a statement from the supplier (B), or a document authorizing payment (D).

Question 17

Match each term with its description.
-Receiving Report

Accepted Answer

A Receiving Report is prepared by the purchaser when the goods are received to document the receipt of the goods, including details such as the date received, quantities, and condition of the goods.

Question 18

Regarding Electronic Data Interchange (EDI), which of the following statements is incorrect?

Accepted Answer

In EDI processes, it is typically the supplier who sends an invoice to the retailer, not the other way around. The retailer would send a purchase order, and upon fulfilling the order, the supplier would send an invoice to the retailer for payment.

Question 19

Match each term with its description.
-Purchase Order

Accepted Answer

A Purchase Order is sent to the vendor when goods are ordered, indicating the types, quantities, and agreed prices for products or services.

Question 20

Which of the following statements describes a purchase order?

Accepted Answer

A purchase order is a document that is issued by a buyer to a supplier, requesting the delivery of goods or services. It outlines the items or services to be purchased, the agreed-upon price, and the terms of payment and delivery.

Quiz 7: Internal Control and Cash

A company check for payment must be signed by ________.

A streamlined process that bypasses paper documents altogether and in which computers of retailers communicate directly with the computers of suppliers to automate routine business transactions is known as ________.

Before sending the check for payment of goods, the controller should examine the payment pack. List the documents that are included in the payment pack and describe the information provided by each document.

List the four steps, the proper order, of the purchasing and payment process.

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

Evaluated Receipts Settlement is ________.

Match each term with its description. -Check

Which of the following items must be examined by the controller or treasurer before signing a check?

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

Match each term with its description. -Invoice

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

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

In a good internal control system, which of the following sets of documents is required for proper approval of a payment to a supplier?

Which of the following is NOT a reason why paying by check is an important internal control?

Which of the following statements describes a receiving report?

Match each term with its description. -Receiving Report

Regarding Electronic Data Interchange (EDI) , which of the following statements is incorrect?

Match each term with its description. -Purchase Order

Which of the following statements describes a purchase order?