Question 1

Verification of prices and terms of the sale must also be performed prior to completing the transaction.

Accepted Answer

It is important to verify prices and terms of the sale before completing a transaction to ensure that both parties are in agreement and there are no future disputes.

Question 2

Controls are needed to ensure that goods are received on a timely basis and bills are sent out for all goods that are received.

Accepted Answer

Controls are needed to ensure that goods are received on a timely basis and that bills are sent out for all goods that are shipped, not received.

Question 3

Approved customer orders, sales orders, pick tickets, or similar documents authorize the release of goods from storage or warehousing.

Accepted Answer

Approved customer orders, sales orders, pick tickets, or similar documents serve as authorization for the release of goods from storage or warehousing.

Question 4

Companies use documents to prepare records of sales and cash-related activities, assist in verifying that functions are completed, and trigger recording activities in the accounting records.

Accepted Answer

Companies do use documents for these purposes, so the statement is true.

Question 5

Scanning a bar code and entering a diagnostic code are examples where the price charged for the good or service has been preset and therefore pre-authorized by management.

Accepted Answer

Scanning a bar code and entering a diagnostic code both involve technology that retrieves preset pricing information, which has been authorized by management prior to the transaction.

Question 6

When a payment is received through the mail, it is usually in the form of a check and is accompanied by a bill of lading.

Accepted Answer

A bill of lading is a document issued by a carrier to acknowledge receipt of cargo for shipment, not typically associated with a payment received through the mail, which is more often accompanied by an invoice or payment stub.

Question 7

When the invoice is also the remittance advice, it is sometimes called a turnaround document.

Accepted Answer

When the invoice also serves as the remittance advice, it is called a turnaround document.

Question 8

Cash coming into the business from all sources is deposited weekly using a deposit ticket.

Accepted Answer

Cash coming into the business from all sources may be deposited more frequently than weekly, such as daily, to ensure better cash management and security. The frequency of deposits can vary based on the company's policy and the volume of transactions.

Question 9

Cash receipts should be deposited daily, and the accounting records should be updated on a timely basis.

Accepted Answer

Depositing cash receipts daily helps prevent theft or loss of funds, and updating accounting records in a timely manner allows for accurate financial reporting and decision-making.

Question 10

When a customer returns a purchase or the seller grants the customer credit for a defective item, a debit memo is prepared.

Accepted Answer

When a customer returns a purchase or the seller grants the customer credit for a defective item, a credit memo is prepared, not a debit memo. A credit memo reduces the amount the customer owes to the seller.

Question 11

Cash received for sales comes in through several channels.

Accepted Answer

Cash received for sales can come from various channels such as in-person transactions, online payments, check payments, and credit card transactions.

Question 12

The initial cash records are the cash alternative record and daily transmittal list.

Accepted Answer

The initial cash records typically include the cash receipts journal and the cash disbursements journal, not the cash alternative record and daily transmittal list.

Question 13

When checks are received in the mail, they should immediately be restrictively endorsed and a daily remittance list should be prepared concurrently.

Accepted Answer

It is important to restrictively endorse checks as soon as they are received to help prevent fraud. Additionally, preparing a daily remittance list concurrently can help ensure that all received checks are properly accounted for and deposited in a timely manner.

Question 14

When cash is received, the goal is to create an immediate record of its payment and place it in safekeeping.

Accepted Answer

The answer of When cash is received, the goal is...

Question 15

The invoice processing and billing function should be independent of the shipping function to provide adequate segregation of duties.

Accepted Answer

Segregation of duties is an important control measure that aims to prevent fraud and errors in financial transactions. By separating responsibilities between different individuals, it becomes more difficult to perpetrate fraud as collusion becomes less feasible. In this case, separating the invoice processing and billing function from the shipping function ensures that the individual responsible for billing does not have control over the shipping process, which reduces the risk of theft or other unauthorized activity.

Question 16

The credit approval or insurance verification process must be completed and documented.

Accepted Answer

The credit approval or insurance verification process must be completed and documented in order to ensure that the appropriate financial or risk management measures are taken. This documentation is often required by regulatory agencies and may be needed in the event of an audit or investigation.

Question 17

Some businesses use a lock box system for checks received through the mail.

Accepted Answer

This statement is true. Many businesses use lock boxes to securely receive and process checks that are mailed to them. The lock box is a secure box with a lock and key that is located at a bank or other financial institution. Customers can send their payments directly to the lock box, and the bank will process the payments and deposit the funds into the business's account. This system helps businesses to streamline their accounts receivable process and improve their cash flow.

Question 18

The activities involved in managing bad debts include estimating and recording the appropriate amount of bad debt expense and writing off those receivables believed to be uncollectible.

Accepted Answer

Managing bad debts involves estimating and recording the appropriate amount of bad debt expense and writing off those receivables believed to be uncollectible.

Question 19

Authorization for the cash sale should come from a source that is independent of the person completing the sale.

Accepted Answer

The answer of Authorization for the cash sale should come...

Question 20

When the mail is opened and checks are received, a document called a daily remittance list is immediately prepared.

Accepted Answer

This statement is true. When checks are received, a daily remittance list is prepared to document the payments received.

Quiz 10: Auditing Revenue Process: Sales, Billing and Collection in the Health-Care Provider and Retailing Industries