MC Ch. 7 - 7.29 Revenues are normally considered to have been earned when a All possibility of return has expired b The company has substantially

MC Ch. 7 - 7.29 Revenues are normally considered to have...

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7.29 Revenues are normally considered to have been earned when a. All possibility of return has expired. b. The company has substantially accomplished what it must to be entitled to the benefits. c. The cash is collected. d. Goods have been shipped. LO 7-3 7.30 Sales are normally recorded on the date of the a. Customer purchase order. b. Bill of lading. c. Sales invoice. d. Payment check. LO 7- 2 7.31 When auditing the revenue and collection cycle, auditors normally select balances to confirm from the a. Sales journal. b. Accounts receivable listing. c. General ledger. d. Cash receipts listing. LO 7- 2 7.32 Which of the following accounts is not normally part of the revenue and collection cycle? a. Sales b. Accounts Receivable. c. Cash. d. Purchases Returns and Allowances LO 7- 3 7.33 The control procedure “credit sales approved by credit department” is directed toward which transaction assertion? a. Occurrence b. Completeness c. Accuracy d. Cutoff LO 7- 3 7.34 Which of the following would be the best protection for a company that wishes to prevent the “lapping” of trade accounts receivable? a. Separate duties so that the bookkeeper in charge of the general ledger has no access to incoming
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mail. b. Separate duties so that no employee has access to both checks from customers and currency from daily cash receipts. c. Have customers send payments directly to the company's depository bank. d. Request that customer's payment checks be made payable to the company and addressed to the treasurer. LO 7-3 7.35 Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable? a. Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence. b. Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off. c. Write-offs must be approved by the cashier who is in a position to know whether the receivables have, in fact, been collected. d. Write-offs must be authorized by company field sales employees who are in a position to determine customers' financial standing. LO 7-4 7.36 Auditors sometimes use comparisons of ratios as audit evidence. An unexplained decrease in the ratio of gross profit to sales may suggest which of the following possibilities? a. Unrecorded purchases. b. Unrecorded sales. c. Merchandise purchases being charged to selling and general expense. d. Fictitious sales. LO 7-3 7.37 An audit team is auditing sales transactions. One step is to vouch a sample of debit entries from the accounts receivable subsidiary ledger back to the supporting sales invoices. The purpose of this audit procedure is to establish that a. Sales invoices represent bona fide sales.
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