Which of the following accounts does not appear in the acquisition and expenditure cycle? a. Cash. b. Purchases returns. c. Sales returns. d. Prepaid insurance. c. Correct Although similar to purchases because they require a receiving report, sales returns are considered part of the revenue and collection cycle because they affect accounts receivable. For which of the following accounts would the matching concept be the most appropriate? a. Cost of goods sold. b. Research and development. c. Depreciation expense. d. Sales. a. Correct Cost of goods sold should be matched with sales by using inventory to record cost of goods not yet sold. Which of the following would not overstate current-period net income? a. Capitalizing an expenditure that should be expensed. b. Failing to record a liability as an expense. c. Failing to record a check paying an item in Vouchers Payable. d. All of the above would overstate net income. c. Correct Has no effect on net income. It overstates cash and payables. A client's purchasing system ends with the recording of a liability and its eventual payment. Which of the following best describes auditors' primary concern with respect to liabilities resulting from the purchasing system?
a. Accounts payable are not materially understated. b. Authority to incur liabilities is restricted to one designated person. c. Acquisition of materials is not made from one vendor or one group of vendors. d. Commitments for all purchases are made only after established competitive bidding procedures are followed. a. Correct The completeness assertion is very important in the audit of liabilities. Which of the following is an internal control activity that could prevent a paid disbursement voucher from being presented for payment a second time? a. Vouchers should be prepared by individuals who are responsible for signing disbursement checks. b. Disbursement vouchers should be approved by at least two responsible management officials. c. The date on a disbursement voucher should be within a few days of the date the voucher is presented for payment.
You've reached the end of your free preview.
Want to read all 8 pages?
- Winter '15
- Accounting, C. Correct