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31 Cards in this Set
- Front
- Back
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Which of the following is not an account affected by the sales and collection cycle?
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Gross margin
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Which of the following is not one of the five classes of transactions included in the sales and collection cycle?
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depreciation expense
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What event initiates a transaction in the sales and collection cycle?
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Customer request for goods.
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A _________ is a document that indicates a request for merchandise by a customer.
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customer order
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A _________ is a document that communicates the description, quantity, and related information for goods ordered by a customer.
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sales order
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What critical event must take place before goods can be shipped?
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Credit approval
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Before goods are shipped on account, a properly authorized person must:
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approve the customer’s credit
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A document prepared to initiate shipment of the goods sold is the
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bill of lading
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The document used to indicate to the customer the amount of a sale and payment due date is the
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sales invoice
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At what point in the sales and collection cycle does the company first give up assets?
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Shipment of goods
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Most companies recognize sales revenue when
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goods are shipped
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Which of the following is not a business function within the “Sales” class of transactions
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Processing and recording sales returns and allowances
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The total of the individual account balances in the accounts receivable master file equals the
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balance of the accounts receivable account in the general ledger.
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A listing of amounts owed by customer which shows how long each component part has been due is the
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aged accounts receivable trial balance
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A document sent to each customer showing his or her beginning accounts receivable balance and the amount and date of each sale, cash payment received, any debit or credit memo issued, and the ending balance is the
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monthly statement
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The document that accompanies the customer’s payment is the
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remittance advice.
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The document that supports reductions in accounts receivable is the
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credit memo
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A document that initiates shipment of goods and indicates the description of the merchandise, the quantity shipped, and customer name and address is the:
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bill of lading
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When designing audit procedures, the direction of tests is a crucial step in satisfying the
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completeness objective
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Which of the following documents is not commonly associated with the “cash receipts” class of transactions
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Sales order
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The process which postpones entries for the collection of receivables to conceal an existing cash shortage is referred to as:
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lapping
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When sales invoices are automatically calculated and posted by a computer, the auditor may be able to reduce substantive tests of transactions for which, if any, objective?
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Accuracy
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The ____________ is a contract between a carrier (e.g., a trucking company) and the seller of goods that dictates the details surrounding the shipment of goods.
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bill of lading
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Some companies have customers send payments directly to an address maintained by a bank. This is called a(n) _______ system
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lockbox
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In many audits, no substantive tests of transactions are made for the ________ objective on the grounds that understatement of sales is not a concern.
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completeness
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The most important aspects of the billing function include all but which of the following?
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Making sure that no shipment has been billed more than twice.
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For the most part, the audit of the sales and collection cycle
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can be performed independently of the audit of other cycles
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An audit procedure that compares the name, amount, and dates shown on remittance advices with cash receipts journal entries and with related duplicate deposit slips would be effective in detecting
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lapping.
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In which of the following will sales return and allowances not be recorded?
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Cash receipts journal
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For most firms, the function of indicating credit approval is recorded on the
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sales order
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The document used as the basis for recording sales transactions and updating the accounts receivable master file is the:
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sales invoice.
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