Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate control activities over the invoicing function allow goods to be shipped that are not invoiced. The inadequate control activities 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 shipped but not invoiced, revenues and receivables are understated because the sales are not recorded. Inventory is overstated because the goods are removed from inventory but not recorded as sold.

Alpha Company Uses Its Sales Invoices for Posting Perpetual Inventory