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B) treasurer; vice president of financeThe ________ normally triggers the billing process in the revenue cycle.A) sales order received from the sales departmentB) picking ticket received from the sales departmentC) packing slip received from the shipping departmentD) journal voucher received from the shipping departmentC) packing slip received from the shipping departmentThe ________ normally triggers the customer payment recording process.A) sales invoiceB) deposit slipC) remittance adviceD) customer monthly statementC) remittance adviceThe ________ should always be included with a merchandise shipment to a customer.A) picking ticketB) packing slipC) sales invoiceD) remittance adviceB) packing slipAccording to generally accepted accounting principles, a sale is recognized when A) cash is received from the customer.B) inventory is removed from the warehouse.C) inventory becomes the legal property of the customer.D) a sales order is approved by sales, inventory control, and credit departments.C) inventory becomes the legal property of the customer.________ is not a basic activity of the revenue cycle.A) Sales order entry B) Shipping C) ReceivingD) BillingC) ReceivingWhen a customer places an order (on account) for a certain product, what should be done before the order is checked for inventory availability? A) The customer's available credit should be checked. B) The sales order should be created and written to a file. C) Shipping should be notified of an order in process. D) A picking list should be generated for the warehouse.A) The customer's available credit should be checked.How is credit approval generally handled for established customers with a documented payment history? A) A new credit application is requested. B) General authorization by a sales clerk C) Specific authorization by the credit manager D) A formal credit check should be made for each sale.B) General authorization by a sales clerkWhat is a typical procedure for processing sales orders from new customers or customers making a purchase that causes their credit limit to be exceeded? A) General authorization to approve the order is given to sales clerks. B) Specific authorization must be granted by the credit manager.C) The sale should be rejected. D) The sales clerk should order a report from a credit bureau before approving the order.B) Specific authorization must be granted by the credit manager.Checking the quantity of inventory available before accepting a sales order is a good practice for all of the reasons except toA) determine which items may need to be back ordered. B) verify the accuracy of the perpetual inventory records. C) inform the customer about availability and delivery times. D) update inventory records to reduce the quantity available by the number of items ordered.B) verify the accuracy of the perpetual inventory records.Special software packages called ________ can help an organization manage customer service. A) EDI systemsB) CRM systemsC) POS systemsD) VMI systemsB) CRM systemsThe ________ is a legal contract that defines responsibility for goods that are in transit. A) bill of lading B) packing slip C) back order D) picking listA) bill of ladingTwo documents usually accompany goods shipped to a customer. What are the two documents? A) a bill of lading and an invoice B) a packing slip and a bill of lading C) an invoice and a packing slip D) an invoice and a sales orderB) a packing slip and a bill of ladingThe basic document created in the billing process is call a ________.A) bill of lading B) sales invoice C) sales order D) packing listB) sales invoiceA company uses the method for tracking accounts receivable where customers pay according to individual sales invoices. This describes the ________ method. A) monthly statement B) open-invoice C) balance forward D) cycle billingB) open-invoiceA method for tracking accounts receivable that matches specific invoices and payments from the customer is called a(n) ________ method. A) specific identificationB) balance forward C) cycle billing D) open-invoiceD) open-invoice
The document a customer returns with their payment and that identifies the source and the amount of the payment is called a A) remittance advice. B) remittance list. C) credit memorandum. D) debit memorandum.A) remittance advice.In the ________ method of tracking accounts receivable, customers pay according to the amount showing on their monthly statement and payments are applied against the total account balance. A) specific identificationB) open-invoice C) balance forward D) remittance adviceC) balance forwardWhen a customer pays off the balance on an invoice, the payment is credited to the ________ file. A) customer master B) sales transaction C) cash receipts masterD) All of the above are correct.A) customer masterA type of business document in which part of the original document is returned to the source for further processing is called a ________ document. A) feedback B) returnable C) closed-loop D) turnaroundD) turnaroundA document typically encountered in the revenue cycle that is both an output document and a source document is theA) sales invoice.B) customer purchase order.C) sales order.D) packing slip.A) sales invoice.A(n) ________ system prepares and mails monthly statements to customers throughout the entire month, instead of just at the end of the month.A) continuous B) open-invoice C) cycle billing D) balance forwardC) cycle billingThe activities involved in soliciting and processing customer orders within the revenue cycle are known as theA) sales order entry process. B) shipping order process. C) revenue process. D) marketing process.A) sales order entry process.Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy Company. He is a product packer. The headphones give him computer-generated instructions so he knows the location of each item and quantity that should be included in the order. These instructions are the equivalent of aA) picking ticket.B) bill of lading.C) packing slip.D) sales order.A) picking ticket.The shipping department at Eka Toys follows policies that determine which carrier will deliver orders according to the size, weight, and destination of the shipment. It maintains standing agreements with shippers that specify legal responsibility for the shipment while it is in transit. The terms of the shipping agreements are documented onA) picking tickets.B) packing slips.C) bills of lading.D) RFID tags.C) bills of lading.The accounts receivable management method typically used by credit card companies is A) balance forward.B) postbilling.C) monthly statement.D) open-invoice.A) balance forward.
If a firm does not use an ERP, the best way to mitigate the risk of the destruction of master data is toA) implement backup and disaster recovery procedures.B) use an ERP.C) proper segregation of duties.D) use of multiple master data files.A) implement backup and disaster recovery procedures.If a firm uses an ERP, the best way to mitigate the risk of the destruction of master data is toA) frequently update the ERP system.B) implement the ERP system in three separate instances.C) periodically audit the ERP system.D) integrate the ERP system with all IT functions.B) implement the ERP system in three separate instances.Identify a useful tool for monitoring accounts receivable.A) ERP exception reportB) accounts receivable aging reportC) accounts receivable tolerance reportD) customer credit limit reportB) accounts receivable aging reportAn accounts receivable aging report is useful for doing everything exceptA) estimating bad debts.B) estimating future sales.C) projecting the timing of future cash flows.D) deciding whether to increase a specific customer's credit limit.B) estimating future sales.It costs ________ times as much to acquire a new customer as it does to make a sale to an existing customer.A) twoB) fiveC) eightD) tenB) fiveResearch suggests which of the following is key to improving total customer satisfaction?A) price of productB) speed of shippingC) quality and nature of customer contact after the saleD) quality and nature of customer contact before the saleC) quality and nature of customer contact after the saleA picking ticket is generated by theA) shipping process.B) sales order entry process.C) packing process.D) billing process.B) sales order entry process.A picking ticket is generated by theA) shipping process.B) sales order entry process.C) packing process.D) billing process.B) sales order entry process.The packing slipA) lists the quantity, price, and description of each item included in the shipment.B) lists the price and description of each item included in the shipment.C) lists the quantity and description of each item included in the shipment.D) lists the quantity and price of each item included in the shipment.C) lists the quantity and description of each item included in the shipment.Which of the decisions below is not ordinarily found as part of the revenue cycle? A) What credit terms should be offered? B) How often should accounts receivable be subjected to audit? C) How can customer payments be processed to maximize cash flows? D) What are the optimal prices for each product or service?B) How often should accounts receivable be subjected to audit?Key differences exist when an integrated Enterprise Resource Planning system (ERP) replaces an existing AIS or legacy system. For example, ________ are more accurate and timely, enabling sales order entry staff to provide customers more accurate information about delivery dates. A) inventory records B) cash receipts C) credit approval decisions D) exception reportsA) inventory recordsWhich of the following is not a key decision that needs to be made in the revenue cycle?A) How should merchandise be delivered to customers?B) Should credit be extended to customers?C) How can customer payments be processed to maximize cash flow?D) Which vendor should inventory be purchased from?D) Which vendor should inventory be purchased from?Regularly reviewing an accounts receivable aging report can help management do what?A) spot firms who are falling behind in their paymentsB) identify customers who have not purchased anything latelyC) improve the speed which customers make paymentsD) determine whether the firm's pricing policy is effectiveA) spot firms who are falling behind in their paymentsRegularly reviewing an accounts receivable aging report can help management do what?A) identify customers who have not purchased anything latelyB) determine whether changes are needed in the firm's credit policiesC) improve the speed which customers make paymentsD) determine whether the firm's pricing policy is effectiveB) determine whether changes are needed in the firm's credit policiesBy using an ERP to merge the billing, sales, and marketing functions, the firm may be able to A) bill the customer right after the sale occurs.B) market products and services on bills sent to customers.C) use customer's past purchase history to send information about related products and services the customer may be interested in.D) eliminate the need for a firm to have a billing, sales, and marketing department.C) use customer's past purchase history to send information about related products and services the customer may be interested in.Suppose management wanted to increase the speed of processing customer payments. One way to speed up payment transaction processing is to A) use a FEDI.B) use JEDI analysis software.C) eliminate credit sales.D) extend the amount of credit offered to customers.A) use a FEDI.True or False: Shipping efficiency can often be improved by replacing RFID tags with bar codes.FALSEBefore a shipping notice is prepared during the revenue cycle, shipping department personnel should match the inventory received from the warehouse to theA) sales order.B) picking tickets.C) picking ticket and sales order.D) sales order and bill of lading.C) picking ticket and sales order.Which is the best control to prevent invoicing customers for more than the actual quantity shipped?A) Use the information from the sales order to prepare the sales invoice.B) Use the information from the packing slip to prepare the sales invoice.C) Use the information from the bill of lading to prepare the sales invoice.D) Use the information from the picking ticket to prepare the sales invoice.B) Use the information from the packing slip to prepare the sales invoice.The cashier deposits checks for Benedek Incorporated and also prepares payments to vendors. Of the following, who is best able to reconcile the bank statement to Benedek's records on a regular basis?A) cashierB) internal audit departmentC) treasurerD) external auditorB) internal audit departmentA monthly statement sent to customers serves a control purpose byA) providing an opportunity for customers to verify the balance owed and activity on the account.B) triggering the process to record a customer payment.C) summarizing invoices and amounts due for customers.D) reminding customers of the balance due and due date.A) providing an opportunity for customers to verify the balance owed and activity on the account.
Which of the following is not one of the controls when customer payments are commingled with other mail?A) preparing a remittance list as mail is openedB) restrictively endorsing checks when receivedC) requiring two mail room clerks to open mail togetherD) requiring the controller to be personally present when mail is received and openedD) requiring the controller to be personally present when mail is received and openedMatching customer account numbers and inventory item numbers to the numbers in the customer and inventory master files is an example of a A) completeness test. B) field check. C) reasonableness test. D) validity check.D) validity check.During the sales order entry process, a ________ is performed to compare the quantity ordered with the standard amounts normally ordered. A) completeness test B) redundant data check C) field check D) reasonableness testD) reasonableness testDuring the sales order entry process, a ________ is performed to verify that each transaction record contains all appropriate data items. A) completeness test B) redundant data check C) field check D) reasonableness testA) completeness testThe best solution for maintaining accurate automated perpetual inventory system is to useA) closed-loop verification when inventory is received from vendors and recorded.B) point of sale devices integrated with inventory records.C) periodic physical counts to reconcile with perpetual inventory records.D) RFID tags.D) RFID tags.Segregation of duties controls dictates that the collection and recording functions be kept separate from each other. However, the accounts receivable department needs to know when customers pay their invoices. What is a solution to this potential internal control problem? A) Establish a lockbox arrangement with a bank.B) Have customers send a remittance advice with their payment. C) Have mailroom personnel prepare a remittance list which can be forwarded to accounts receivable. D) all of the aboveD) all of the aboveThe benefits of a lockbox arrangement with a bank are maximized when A) the bank is located nearby to the company, so remittance advices can be delivered to the company every day. B) several banks around the country are used, in order to minimize the time payments spend in the mail.C) an arrangement is made with only one bank, so all remittance advices can be batched for processing.D) the bank deposits the payments and accesses the customer's information system to record the payments.B) several banks around the country are used, in order to minimize the time payments spend in the mail.An ________ is an arrangement where a bank receives customer payments and transmits payment data to the organization.A) e-commerce.B) electronic funds transfer (EFT). C) electronic lockbox. D) electronic data interchange (EDI).C) electronic lockbox.Customers that send their payments electronically directly to the billing company's bank are usingA) electronic funds transfer (EFT). B) electronic data interchange (EDI). C) procurement cards. D) an electronic lockbox.A) electronic funds transfer (EFT).A way to incorporate the advantages of Electronic Data Interchange with the Electronic Funds Transfer is A) Financial Electronic Data Interchange. B) e-commerce. C) to use procurement cards. D) an electronic lockbox.A) Financial Electronic Data Interchange.To ensure proper segregation of duties, only the ________ has authority to issue credit memos. A) accounts receivable supervisor B) controllerC) credit manager D) cashierC) credit managerIt has been discovered that credit sales have been made to customers with a poor credit rating. If this continues, the company will face increasing uncollectible receivables and losses due to bad debts. Separation of duties between ________ and ________ should help resolve the problem.A) shipping; billing duties B) credit approval; marketingC) billing; credit approvalD) marketing; accounts receivableB) credit approval; marketingConsider the following revenue cycle scenario: The company has been exposed to customer dissatisfaction and the suggested control procedure to be implemented is to install and use bar-code scanners. What is the threat? A) The company may be shipping the wrong merchandise. B) The company may be shipping the wrong quantities of merchandise. C) The company may be shipping orders to the wrong address. D) All of the above threats may apply to this scenario.A) The company may be shipping the wrong merchandise.Separating the shipping and billing functions is designed to reduce the threat of A) failure to bill customers. B) billing customers for wrong quantities. C) billing customers before merchandise has been shipped.D) shipping the wrong merchandise.A) failure to bill customers.All of the following edit checks for online editing of accounts receivable transactions would probably be included except A) validity checks on customer ID and invoice numbers. B) check digit verification on the amount of the sale. C) closed loop verification on the customer ID. D) field checks on the values in dollar fields.B) check digit verification on the amount of the sale.When a proper segregation of duties exists in the area of handling cash receipts, the ________, who reports to the ________, actually handles the cash and is not the same person who posts cash receipts to customer accounts. A) cashier; treasurer B) cashier; controller C) accountant; treasurer D) accountant; controllerA) cashier; treasurerIn a revenue cycle with proper controls, the ________ who reports to the ________, is not involved in any cash handling activities. A) accounts receivable clerk; treasurer B) accounts receivable clerk; controller C) cashier; controller D) cashier; treasurerB) accounts receivable clerk; controllerA serious exposure in the revenue cycle is loss of assets. What is the related threat and applicable control procedure that address this exposure? A) shipping errors; reconciliation of sales order with picking ticket and packing slip B) theft of cash; segregation of duties and minimization of cash handling C) making sales that turn out to be uncollectible; force sales people to make collection calls on customers with past due balances D) poor performance; preparation and review of performance reportsB) theft of cash; segregation of duties and minimization of cash handlingWhich of the following duties could be performed by the same individual and not violate segregation of duty controls? A) handling cash and posting to customer accounts B) issuing credit memos and maintaining customer accounts C) handling cash and authorizing credit memos D) handling cash receipts and mailing vendor paymentsD) handling cash receipts and mailing vendor paymentsInternal file labels can be used to prevent the loss of data in the revenue cycle since they A) record off-site storage locations. B) keep competitors from accessing files. C) organize the on-site physical storage site. D) reduce the possibility of erasing important files.D) reduce the possibility of erasing important files.The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He ordered 100 one-size fits all pajama bottoms, but when he ordered 1000 one-size fits all pajama tops, the following error message popped up: "Did you mean to enter a quantity of 1000 for your order?" This message is the result of aA) reasonableness test.B) validity check.C) limit check.D) closed-loop verification.A) reasonableness test.The manager of Cezary Foods was purchasing inventory from Bogumil Distributors online. The manager entered the items and quantities, completed the checkout and payment process, but received the following error message before the order could be processed: "Please enter your phone number." This message is likely the result of aA) validity check.B) completeness test.C) closed-loop verification.D) customer relationship management software application.B) completeness test.Bogumil Distributors is an Internet-based wholesaler. Customers enter their orders online. The manager of Cezary Foods was entering an order when the following error message popped up: "Your order exceeds your available credit. You will be contacted within 8 hours." This message is the result of aA) sign check.B) validity check.C) reasonableness test.D) limit check.D) limit check.Because it is the most fungible of all assets, the management of cash has always been the most difficult of all control issues. The most important of cash controls isA) minimization of cash handling.B) lockbox arrangements.C) segregation of duties.D) frequent reconciliation of records.C) segregation of duties.A clerk at a grocery store scanned the bar code for a low cost bag of frozen chicken wings then gave his friend an expensive brand-name bag of frozen chicken wings.Which of the following controls would best prevent the clerk from getting away with doing this?A) physical inventory countB) segregation of dutiesC) limited physical access to bar codesD) use of RFID tagsD) use of RFID tagsThe accounts receivable clerk destroys all invoices for sales made to family and friends and does not record the sales in the accounts receivable subsidiary ledgers. The family and friends usually give the clerk cash as a "thank you." Which procedure will not prevent or detect this fraud?A) Send monthly statements to all customers with balances owed.B) Reconcile sales invoices in the billing department to the total debits to accounts receivable subsidiary ledgers.C) Sequentially prenumber all invoices and prepare a sequence check at the end of each day.D) Reconcile the accounts receivable control account to the accounts receivable subsidiary ledger.A) Send monthly statements to all customers with balances owed.Which of the following poses an internal control problem?A) Physical inspection of inventory quantity and condition is outsourced to a firm that specializes in this service.B) Products are released from inventory after a warehouse employee and a shipping clerk both sign the pick list.C) Sales representatives have authority to increase customers' credit limits in $1,000 increments.D) When customer payments are received in the mail, checks are sent to the cashier's office and remittance advices are sent to the accounts receivable department.C) Sales representatives have authority to increase customers' credit limits in $1,000 increments.The least effective control for preventing an organization from processing fraudulent credit memo is to A) match each credit memo with a receiving report.B) require approval for each credit memo by the credit manager.C) reconcile total of credit memos to total debits posted to customers' subsidiary ledgers.D) sequentially prenumber all credit memos and perform a sequence check at the end of each day.C) reconcile total of credit memos to total debits posted to customers' subsidiary ledgers.Which of the following is not a threat to the revenue cycle sales order entry process?A) incomplete ordersB) invalid ordersC) cash flow problemsD) uncollectible accountsC) cash flow problemsWhich of the following is not a threat to the revenue cycle shipping process?A) incomplete ordersB) inventory theftC) picking the wrong itemsD) wrong shipping addressA) incomplete ordersWhich of the following is not a threat to the revenue cycle billing process? A) accounts receivable errorsB) loss of customersC) failure to billD) inaccurate credit memosB) loss of customersWhich of the following is not a general threat to the revenue cycle?A) inaccurate master dataB) loss of customersC) poor performanceD) unauthorized disclosure of sensitive informationB) loss of customersWhich of the following is not a general threat to the revenue cycle?A) inaccurate master dataB) loss of customersC) poor performanceD) unauthorized disclosure of sensitive informationB) loss of customersThe legitimacy of customer orders is established by ________ in paper-based customer orders.A) the customer's signatureB) the customer's pin numberC) the customer's verbal authorizationD) prior experience with the customerA) the customer's signatureThe legitimacy of customer orders is established by ________ in Internet-based customer orders.A) digital signaturesB) the customer's pin numberC) the customer's credit card numberD) prior experience with the customerA) digital signaturesFor strongest segregation of duties, the credit manager should never report to A) the marketing department.B) the accounting department.C) the credit department.D) the IT department.A) the marketing department.For strongest segregation of duties, a sales representative should never be allowed to A) discuss the company's products.B) negotiate the sales price.C) approve a sale on credit.D) send a customer a gift.C) approve a sale on credit.True or False: A credit sale should always be denied if it exceeds the customer's credit limit.FALSETrue or False: A credit sale should always be reviewed by a credit manager if it exceeds the customer's credit limit.TRUEWhat documents are used in the revenue cycle?Revenue Cycle Source Document Function Sales order Record customer order. Delivery ticket Record delivery to customer. Remittance advice Receive cash. Credit memo Support adjustments to customer accounts.
Which is the best control to prevent invoicing customers?sales order and bill of lading. C) sales order. Which is the best control to prevent invoicing customers for the quantity ordered, which was more than the quantity shipped due to items on backorder? A) Use the information from the packing slip to prepare the sales invoice.
What decisions need to be made in the revenue cycle and what information is needed to make these decisions?REVENUE CYCLE INFORMATION NEEDS
Information is needed for the following strategic decisions: setting prices for products/services; establishing policies on returns and warranties; deciding on credit terms; determining short-term borrowing needs; and planning new marketing campaigns.
Which of the following controls can minimize the threat of failure to bill?Which of the following controls can minimize the threat of failure to bill? Separation of billing and shipping functions.
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To prevent the loss of valuable data in the revenue cycle, internal file labels can be used to
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