Question 1

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 represents...

Question 2

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 3

Which of the following statements describes a receiving report?

Accepted Answer

A receiving report is a document that confirms the receipt of goods or services by the purchaser. It verifies that the goods have been received in the correct quantities, and in good condition as ordered. It is not an order, statement of purchase or authorization of payment.

Question 4

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

A receiving report confirms that the goods have been received and are in satisfactory condition, an invoice verifies the price and terms of payment agreed upon, and a purchase order authorizes the purchase and defines the terms of the transaction. Together, these documents provide a proper approval of a payment to a supplier, ensuring that the goods were received and in good condition, prices and payment terms were agreed to, and that the purchase was authorized.

Question 5

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, which is typically sent after the goods have been received. It is not an order, a report of goods received, or an authorization for payment.

Question 6

Match each term to its definition.
-Invoice

Accepted Answer

An invoice is typically sent by the vendor to the purchaser after the goods or services have been delivered or shipped, detailing the amount due for payment.

Question 7

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

Electronic Data Interchange (EDI) is a process that allows for the direct communication between the computers of retailers and suppliers, bypassing the need for paper documents. It is used to automate routine business transactions such as purchase orders, invoices, and shipping notices. Real Time Gross Settlement (RTGS), Electronic Fund Transfer (EFT), and Evaluated Receipts Settlement (ERS) are all different processes for transferring funds or settling transactions, but they do not involve the direct communication of computers between retailers and suppliers.

Question 8

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

Accepted Answer

In the context of EDI, it is the supplier who typically sends an invoice to the retailer, not the other way around. EDI facilitates the electronic exchange of business documents, such as purchase orders and invoices, between companies. When a transaction occurs, the supplier would issue an invoice to the retailer to request payment for goods or services provided.

Question 9

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

Accepted Answer

Before signing a check, the controller or treasurer should examine the purchase order to ensure that it is a legitimate expense and that the amount being paid is correct. The ledger, confirmation report, and journal entry may also be helpful in verifying the legitimacy of the expense, but they are not necessarily required to be examined before signing a check.

Question 10

Which of the following statements describes a purchase order?

Accepted Answer

A purchase order is a document issued by a buyer to a supplier, indicating the items and quantities of goods or services that the buyer wishes to purchase. It is essentially an order to purchase.

Question 11

Match each term to its definition.
-Receiving Report

Accepted Answer

A Receiving Report is prepared by the purchaser when the goods are received to document the receipt of the goods.

Question 12

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 13

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

Accepted Answer

C)Before signing the check,the authorized official reviews the invoice or other evidence supporting the payment.

Question 14

A company check for payment must be signed by ________.

Accepted Answer

A company check can be signed by an employee who has been authorized by the company to do so. This is usually done through a formal process where the company designates specific individuals who have the authority to sign checks on behalf of the company. The company president or external auditor may have signing authority, but it is not a universal requirement. A bank employee would not have the authority to sign a company check.

Question 15

Evaluated Receipts Settlement is ________.

Accepted Answer

Evaluated Receipts Settlement is a process that allows organizations to compress the payment approval process into a single step by comparing the receiving report to the purchase order, eliminating the need for invoice-presentment. This streamlines the process and helps organizations avoid potential errors and discrepancies that may arise when handling paper-based documents.

Question 16

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,of the...

Question 17

Match each term to its definition.
-Check

Accepted Answer

The answer of Match each term to its definition.
-Check
...

Question 18

Match each term to its definition.
-Purchase Order

Accepted Answer

A Purchase Order is a document sent to a vendor to order goods or services. It is prepared and sent by the buyer when they decide to purchase goods.

Question 19

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

Accepted Answer

The statement is false. A key to strong control over petty cash is to ensure that only one person serves as custodian at a time. This helps to prevent fraud and ensure accountability for all transactions.

Question 20

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. It is usually maintained by businesses to cover small expenses like office supplies, travel expenses, and other miscellaneous expenses that do not require a formal request for reimbursement.

Quiz 8: Internal Control and Cash