Chapter 4: The Revenue Cycle
1. Which document is NOT prepared by the sales department?
a. packing slip
b. shipping notice
c. bill of lading
d. stock release
2. Which document triggers the update of the inventory
subsidiary ledger?
a. bill of lading
b. stock release
c. sales order
d. shipping notice
3. Which function should the billing department NOT perform?
a. record the sales in the sales journal
b. send the ledger copy of the sales order to accounts
receivable
c. send the stock release document and the shipping notice
to the billing department as proof of shipment
d. send the stock release document to inventory control
4. When will a credit check approval most likely require specific
authorization by the credit department?
a. when verifying that the current transaction does not
exceed the customer’s credit limit
b. when verifying that the current transaction is with a
valid customer
c. when a valid customer places a materially large order
d. when a valid customer returns goods
5. Which type of control is considered a compensating control?
a. segregation of duties
b. access control
c. supervision
d. accounting records
6. Which of the following is NOT an independent verification
control?
a. The shipping department verifies that the goods sent
from the warehouse are correct in type and quantity.
b. General ledger clerks reconcile journal vouchers that
were independently prepared in various departments.
c. The use of prenumbered sales orders.
d. The billing department reconciles the shipping notice
with the sales invoice to ensure that customers are
billed for only the quantities shipped.
7. Which function or department below records the decrease in
inventory due to a sale?
a. warehouse
b. sales department
c. billing department
d. inventory control
8. Which situation indicates a weak internal control structure?
a. the AR clerk authorizes the write off of bad debts
b. the record-keeping clerk maintains both AR and AP
subsidiary ledgers
c. the inventory control clerk authorizes inventory
purchases
d. the AR clerk prepares customer statements every month
9. The bill of lading is prepared by the
a. sales clerk.
b. warehouse clerk.
c. shipping clerk.
d. billing clerk.
10. Which of following functions should be segregated?
a. opening the mail and recording cash receipts in the
journal
b. authorizing credit and determining reorder quantities
c. shipping goods and preparing the bill of lading
d. providing information on inventory levels and
reconciling the bank statement
PROBLEMS
1. Flowchart Analysis
Use the flowchart on the following page to answer these
questions:
a. What accounting document is represented by symbol A?
b. What is an appropriate name for the department labeled
B?
c. What would be an appropriate description for process C?
d. What is the location represented by symbol D?
e. What accounting record is represented by symbol E?
f. What is an appropriate name for the department labeled
H?
g. What device is represented by symbol F?
h. What device is represented by symbol G?
i. What accounting record is represented by symbol G?
2. Segregation of Functions
Which, if any, of the following situations represent improper
segregation of functions?
a. The billing department prepares the customers’ invoices,
and the accounts receivable department posts to the
customers’ accounts.
b. The sales department approves sales credit memos as
the result of product returns, and subsequent
adjustments to the customer accounts are performed by
the accounts receivable department.
c. The shipping department ships goods that have been
retrieved from stock by warehouse personnel.
7. Stewardship
Identify which department has stewardship over the following
journals, ledgers, and files.
a. Customer open order file
b. Sales journal
c. Journal voucher file
d. Cash receipts journal
e. Inventory subsidiary ledger
f. Accounts receivable subsidiary ledger
g. Sales history file
h. Shipping report file
i. Credit memo file
j. Sales order file
k. Closed sales order file