Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Accounting Information Systems, 13e (Romney/Steinbart)
Chapter 12 The Revenue Cycle: Sales to Cash Collections
12.1 Describe the basic business activities and related information processing operations
performed in the revenue cycle.
1) Basic segregation of duties requires the credit manager reports to the ________ and the
treasurer report to the ________.
A) treasurer; controller
B) treasurer; vice president of finance
C) controller; vice president of finance
D) marketing manager; vice president of finance
2) The ________ normally triggers the billing process in the revenue cycle.
A) sales order received from the sales department
B) picking ticket received from the sales department
C) packing slip received from the shipping department
D) journal voucher received from the shipping department
3) The ________ normally triggers the customer payment recording process.
A) sales invoice
B) deposit slip
C) remittance advice
D) customer monthly statement
4) The ________ should always be included with a merchandise shipment to a customer.
A) picking ticket
B) packing slip
C) sales invoice
D) remittance advice
5) According 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.
6) ________ is not a basic activity of the revenue cycle.
A) Sales order entry
B) Shipping
C) Receiving
D) Billing
7) When 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.
8) 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.
9) What 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.
10) Checking the quantity of inventory available before accepting a sales order is a good practice
for all of the reasons except to
A) 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.
11) Special software packages called ________ can help an organization manage customer
service.
A) EDI systems
B) CRM systems
C) POS systems
D) VMI systems
12) The ________ 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 list
13) Two 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 order
14) The basic document created in the billing process is call a ________.
A) bill of lading
B) sales invoice
C) sales order
D) packing list
15) A 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 billing
16) A method for tracking accounts receivable that matches specific invoices and payments from
the customer is called a(n) ________ method.
A) specific identification
B) balance forward
C) cycle billing
D) open-invoice
17) 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.
18) 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 identification
B) open-invoice
C) balance forward
D) remittance advice
19) When 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 master
D) All of the above are correct.
20) A 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) turnaround
21) A document typically encountered in the revenue cycle that is both an output document and a
source document is the
A) sales invoice.
B) customer purchase order.
C) sales order.
D) packing slip.
22) 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 forward
23) The activities involved in soliciting and processing customer orders within the revenue cycle
are known as the
A) sales order entry process.
B) shipping order process.
C) revenue process.
D) marketing process.
24) 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 a
A) picking ticket.
B) bill of lading.
C) packing slip.
D) sales order.
25) 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 on
A) picking tickets.
B) packing slips.
C) bills of lading.
D) RFID tags.
26) The accounts receivable management method typically used by credit card companies is
A) balance forward.
B) postbilling.
C) monthly statement.
D) open-invoice.
27) Describe the basic revenue cycle activities.
28) Define and describe benefits of a CRM system.
29) How can Electronic Data Interchange (EDI) facilitate the billing and accounts receivable
process?
30) Describe typical credit approval procedures.
31) Describe the two methods to manage accounts receivable.
32) Describe cycle billing and identify how an organization might benefit by using cycle billing.
33) Discuss ways in which technology can be used to streamline cash collections.
34) If a firm does not use an ERP, the best way to mitigate the risk of the destruction of master
data is to
A) implement backup and disaster recovery procedures.
B) use an ERP.
C) proper segregation of duties.
D) use of multiple master data files.
35) If a firm uses an ERP, the best way to mitigate the risk of the destruction of master data is to
A) 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.
36) Identify a useful tool for monitoring accounts receivable.
A) ERP exception report
B) accounts receivable aging report
C) accounts receivable tolerance report
D) customer credit limit report
37) An accounts receivable aging report is useful for doing everything except
A) 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.
38) It costs ________ times as much to acquire a new customer as it does to make a sale to an
existing customer.
A) two
B) five
C) eight
D) ten
39) Research suggests which of the following is key to improving total customer satisfaction?
A) price of product
B) speed of shipping
C) quality and nature of customer contact after the sale
D) quality and nature of customer contact before the sale
40) A picking ticket is generated by the
A) shipping process.
B) sales order entry process.
C) packing process.
D) billing process.
41) A picking ticket is generated by the
A) shipping process.
B) sales order entry process.
C) packing process.
D) billing process.
42) The packing slip
A) 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.
12.2 Discuss the key decisions that need to be made in the revenue cycle, and identify the
information needed to make those decisions.
1) 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?
2) 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 reports
3) Which 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?
4) Regularly reviewing an accounts receivable aging report can help management do what?
A) spot firms who are falling behind in their payments
B) identify customers who have not purchased anything lately
C) improve the speed which customers make payments
D) determine whether the firm's pricing policy is effective
5) Regularly reviewing an accounts receivable aging report can help management do what?
A) identify customers who have not purchased anything lately
B) determine whether changes are needed in the firm's credit policies
C) improve the speed which customers make payments
D) determine whether the firm's pricing policy is effective
6) By 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.
7) 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.
8) True or False: Shipping efficiency can often be improved by replacing RFID tags with bar
codes.
12.3 Identify major threats in the revenue cycle, and evaluate the adequacy of various control
procedures for dealing with those threats.
1) Before a shipping notice is prepared during the revenue cycle, shipping department personnel
should match the inventory received from the warehouse to the
A) sales order.
B) picking tickets.
C) picking ticket and sales order.
D) sales order and bill of lading.
2) 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.
3) 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) cashier
B) internal audit department
C) treasurer
D) external auditor
4) A monthly statement sent to customers serves a control purpose by
A) 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.
5) 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 opened
B) restrictively endorsing checks when received
C) requiring two mail room clerks to open mail together
D) requiring the controller to be personally present when mail is received and opened
6) Matching 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.
7) 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 test
8) During 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 test
9) The best solution for maintaining accurate automated perpetual inventory system is to use
A) 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.
