13) As a part of the internal control over cash receipts by mail, the mailroom sends both the customer
checks and the remittance advices to the accounting department.
14) Regarding controls over cash receipts by mail, the accounting department should prepare the deposit
ticket from the remittance advices.
15) For strong controls over cash receipts, the checks to be deposited should be sent to the treasurer, and
the remittance advices should be sent to the accounting department.
16) As long as the same person deposits customer checks and makes the journal entry to customer
accounts, there will be good internal control over cash receipts.
17) A basic procedure of internal control over cash receipts is that the deposit of the cash and the
recording of the receipts into the journal should be separated.
18) When a lock-box system is used, a bank employee empties the box daily and records the deposits in
the company‘s journal.
19) When a lock-box system is used, customers send their checks to a post office box that belongs to a
bank.
20) Which of the following is the last step in the daily control over cash receipts by mail?
A) A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank
deposit.
B) The controller opens the mail and sends the remittance advices to the accounting department.
C) The controller compares the records of the day’s bank deposit amount from the treasurer and the debit
to Cash from the accounting department.
D) The accounting department prepares journal entries to cash and the customers’ accounts.
21) Which of the following is used by companies to separate cash duties and establish stronger control
over cash receipts?
A) an encryption system
B) an imprest system
C) a lock-box system
D) a firewall system
22) Which of the following is described as a system where customers send their checks directly to a post
office box that belongs to a bank?
A) an encryption system
B) an imprest system
C) a lock-box system
D) a firewall system
23) With cash receipts by mail, the person who is responsible for comparing the cash debit from the
accounting department and the bank deposit amount is the ________.
A) CEO
B) CFO
C) controller
D) treasurer
24) In a lock-box system ________.
A) customers send their checks directly to a post office box that belongs to the company
B) there is a delay in getting the cash into the company‘s bank account
C) a bank employee empties the box daily and records the deposits into the company’s bank account
D) a bank employee records the journal entry
25) Which of the following statements regarding a lock-box system is incorrect?
A) Customers send their checks directly to a post office box that belongs to the company.
B) Internal control is tight because company personnel never touch incoming cash.
C) A bank employee empties the box daily and records the deposits into the company‘s bank account.
D) Cash is put into the company‘s bank account quickly.
26) For the following situation, state whether it represents a strength or weakness in internal control and
give the reason for your answer.
The mailroom employee opens all incoming mail. Customers’ checks are sent to the treasurer, and
remittance advices are sent to the accounting department. The controller compares the daily bank
deposit amount from the treasurer and the daily debit to cash from the accounting department.
27) Concerning how companies control cash received by mail, state which employee should perform the
following duties:
Duty
Employee who should perform
the duty
Open the mail and send
customer checks to the treasurer
Compare the bank deposits to
the journal entry for cash
receipts
Duty
Employee who should perform
the duty
Open the mail and send
customer checks to the treasurer
Mailroom employee
Compare the bank deposits to
the journal entry for cash
receipts
Controller
Diff: 2
LO: 7-2
AACSB: Analytical thinking
AICPA Functional: Measurement
PE Question Type: Application
H2: Cash Receipts by Mail
28) Concerning how companies control cash received by mail, state which employee should perform the
following duties:
Duty
Employee who should perform
the duty
Use the remittance advices to
record the journal entries for
cash receipts
Deposit the customer checks in
the bank
Duty
Employee who should perform
the duty
Use the remittance advices to
record the journal entries for
cash receipts
Bookkeeper (accounting
department employee)
Deposit the customer checks in
the bank
Treasurer or cashier
1) Before signing a check, the controller or the treasurer should examine the purchase order, the invoice,
and the receiving report to determine that the company received the goods and that the company is
paying only for the goods received.
2) A receiving report should be matched with the supplier invoice before a payment to the supplier is
approved.
3) For good internal control over cash payments, the company officer approving a payment voucher
should be the same as the person who ordered the goods. This ensures that the correct amount of cash is
paid.
4) For good internal control, the purchasing agent should neither receive the goods nor approve the
payment.
5) For good controls over cash payments, the person who orders goods from a supplier should always be
different from the person who approves the payment.
6) Evaluated receipts settlement (ERS) compresses the payment approval process into a single step.
7) Evaluated receipts settlement (ERS) is a streamlined process that bypasses paper documents altogether.
8) Electronic data interchange (EDI) allows a retailer‘s computers to communicate with the computers of
suppliers.
9) Which of the following is the first step in the purchasing and payment process?
A) The purchaser receives an invoice for the goods shipped by the supplier.
B) The purchaser sends a check to the supplier.
C) The purchaser sends a purchase order to the supplier.
D) The purchaser receives the inventory and prepares a receiving report.
10) Which of the following items must be examined by the controller or treasurer before signing a check?
A) the ledger
B) the purchase order
C) the confirmation report
D) the journal entry
11) A company check for payment must be signed by ________.
A) the company president
B) a bank employee
C) an employee specifically authorized by the company
D) the external auditor
12) A streamlined process that bypasses paper documents altogether and in which computers of retailers
communicate directly with the computers of suppliers to automate routine business transactions is
known as ________.
A) Real Time Gross Settlement
B) Electronic Data Interchange
C) Electronic Fund Transfer
D) Evaluated Receipts Settlement
13) Which of the following statements describes a purchase order?
A) It is an order to purchase goods from a supplier.
B) It is a statement from the supplier showing the goods purchased and the amount due.
C) It is a report showing that the goods have been received in good condition, as ordered.
D) It is a document authorizing a payment to a supplier.
14) Which of the following statements describes an invoice from a supplier?
A) It is an order to purchase goods from a supplier.
B) It is a statement from the supplier showing the goods purchased and the amount due.
C) It is a report showing that the goods have been received in good condition, as ordered.
D) It is a document authorizing a payment to a supplier.
15) Which of the following statements describes a receiving report?
A) It is an order to purchase goods from a supplier.
B) It is a statement from the supplier showing the goods purchased and the amount due.
C) It is a report showing that the goods have been received in good condition, as ordered.
D) It is a document authorizing a payment to a supplier.
16) In a good internal control system, which of the following sets of documents is required for proper
approval of a payment to a supplier?
A) a journal entry, a supplier invoice, and a description of the goods being purchased
B) a receiving report, an invoice, and a purchase order
C) a purchase order, a journal entry, and a price catalog
D) a supplier invoice, a bill of lading, and the supplier’s financial statements
17) Evaluated Receipts Settlement is ________.
A) a streamlined process that bypasses paper documents altogether
B) a process that eliminates the need for separation of duties
C) a procedure that compresses the payment approval process into a single step by comparing the
receiving report to the purchase order
D) an organizational plan and all the related measures adopted by an entity to safeguard assets,
encourage employees to follow company policies, promote operational efficiency, and ensure accurate
and reliable accounting records