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Chapter 9: Transaction Cycle - The Revenue Cycle: True/False
Chapter 9: Transaction Cycle - The Revenue Cycle: True/False
True/False
1. Selling goods to customers is the sole objective of the revenue cycle.
3. Inventory data and accounts receivable data are both created and updated by activities within
the revenue cycle.
4. In any DFD regarding the revenue cycle, the customer is always an external entity.
5. A sale should not proceed if a customer's unrecorded accounts receivable amount is greater
than the customer's remaining credit availability.
6. A sales order is created by the sales department and a sales order copy will be sent to the
warehouse for picking goods.
7. As soon as the goods and the sales order copy are received from the warehouse department,
the shipping department can dispatch the goods.
8. As soon as a sales order is created and sent to the warehouse, the sales department should bill
the customer for the goods.
9. Credit check control will be invalidated if invoices are not posted regularly.
10. Ideally, a cashier would be responsible for receiving payments from customers, issuing
receipts for those payments, depositing the payments into the company bank account, and
conducting regular bank account reconciliation.
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Multiple choice
12. The objective of the sales phase in the revenue cycle is to:
a. Effectively conduct sales and arrange the prompt supply of goods and services.
b. Effectively conduct sales.
c. Effectively conduct, record, and monitor sales and arrange the prompt supply of goods
and services.
d. Effectively conduct, record, and monitor sales.
13. The objective of the accounts receivable phase in the revenue cycle is to:
a. Ensure payments for goods and services are received on time and in correct amount.
b. Ensure payments for goods and services are correctly received, recorded and banked.
c. Ensure the accounts payable record is updated accordingly when payments for goods
and services are received.
d. None of the above.
14. Which of the following documents is not generated in the revenue cycle?
a. Sales order
b. Shipping notice
c. Bill of lading
d. Purchase requisition
15. Which of the following departments is not part of the revenue cycle?
a. Billing department
b. Sales department
c. Shipping department
d. Accounts payable department
16. Which document is prepared, usually in multiple copies, as part of the sales process and
potentially used for various purposes, including initiating shipping?
a. Customer order
b. Sales order
c. Shipping notice
d. Packing slip
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17. Which of the following statements is incorrect?
a. The level of sales achieved drives all other activity levels within the organisation.
b. A sound, well-controlled revenue cycle can provide a competitive advantage.
c. A sound, well-controlled revenue cycle can lead to opportunities to sustain higher
product pricing.
d. None of the above.
20. Which of the following technologies is not relevant to the revenue cycle?
a. CRM
b. ERP
c. SCM
d. EDI
21. Ideally, customer data should be produced by a dedicated customer management section of
an organisation. This customer management section is NOT responsible for:
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22. Which of the following activities is not involved in processing the sales order?
23. Which of the following activities is not involved in preparing and the sending the goods to
customers?
a. Pick goods
b. Prepare goods for shipping
c. Deliver goods
d. Update inventory record
a. Credit limit
b. Credit availability
c. Details of recent sales that are not yet recorded in the customer's accounts receivable
account
d. All of above.
26. Requesting a signed purchase order form from the customer prior to accepting a sale can
reduce the risk of:
a. Non-payment
b. Insufficient finished goods inventory available
c. Fictitious sales
d. Poor decision
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27. Which of the following statements is true?
a. The ability to add a new customer and change or assign a credit limit should be
devolved to sales staff.
b. Credit limit should be established on the fiscal soundness of the customer.
c. The age of all receivables needs to be checked only occasionally.
d. All of the above
28. A customer buys a computer over the Internet; she is required to pay for the computer before
the computer is dispatched. This is an example of:
a. Electronic payment
b. Post-billing
c. Credit check
d. Pre-billing
29. A sales order is created by using ________ as the main source of information.
a. Inventory level
b. Credit information
c. Sales request
d. All of the above.
a. Sales order
b. Picking ticket
c. Either a or b
d. Neither a nor b
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32. An invoice is created for each valid sale by basing on:
a. If invoices are not posted regularly, the credit check control may be invalidated.
b. Updating accounts receivable must happen in real-time; otherwise the accounts
receivable accounts will be understated.
c. Invoices must be dispatched with the goods to ensure timely payment.
d. None of the above.
34. An organisation separates the billing and shipping functions and imposes independent checks
to ensure that goods have been shipped prior to billing the customer. This is an example of: