Multiple Choice Questions
The following questions deal with internal controls in the sales and collection cycle. Choose the best response.
a. The accounting system will not post a sales transaction to the sales journal without a valid bill of lading number. This control is most relevant to which transaction-related objective for sales?
(1) Accuracy
(2) Occurrence
(3) Completeness
(4) Posting and summarization
b. The accounting system automatically obtains the unit price based on scans of bar codes for merchandise sold. This control is most relevant to which transaction-related objective for sales?
(1) Accuracy
(2) Occurrence
(3) Completeness
(4) Posting and summarization
c. Which of the following controls would be most effective in detecting a failure to record cash received from customers paying on their accounts?
(1) A person in accounting reconciles the bank deposit to the cash receipts journal.
(2) Transactions recorded in the cash receipts journal are posted on a real-time basis to the accounts receivable master file.
(3) Monthly statements are sent to customers and any discrepancies are resolved by someone independent of cash handling and accounting.
(4) Deposits of cash received are made daily.
d. A key internal control in the sales and collection cycle is the separation of duties between cash handling and record keeping. The objective most directly associated with this control is to verify that
(1) Cash receipts recorded in the cash receipts journal are reasonable.
(2) Cash receipts are correctly classified.
(3) Recorded cash receipts result from legitimate transactions.
(4) Existing cash receipts are recorded.