CHAPTER 4 SELF TEST

1. Stock release- updates inventory SL

2. The following information can be seen in the AR SL:
a. Explanation
b. Invoice number
c. DR/CR amounts
d. Account balance
e. Credit limit
f. Available credit.
3. Credit memo- document used to approve the customer to receive credit for the merchandise
returned
4. Formal Sales Order- a source document which captures vital information about the sales such as
name and address of the customer, customer account number, product description, quantities
and unit prices and other relevant financial information
5. AR Department- receives the ledger copy of the SO
6. Reason for return- can be seen in a credit memo but not in a sales order
7. Sales Journal Voucher- update the GL control accounts for the goods sold pertaining to AR and
Sales.
8. Sales Return Account- least likely to be seen in a cash receipts journal
9. Customer placing an order- not part of the internal sales process of a company
10. Stock records- are NOT the formal accounting records for controlling inventory assets and are
adjusted by warehouse employees to reflect inventory reduction.
11. Journal vouchers- used by the GL function to update the control accounts
12. Remittance advice- used to post the customers' accounts in the AR SL
13. Sales Return Procedure
a. Prepare return slip
b. Prepare credit memo
c. Approve credit memo
d. Update sales journal
e. Update inventory and AR records
f. Update GL
14. The following information can be traced in the Inventory SL:
a. Item description
b. Units sold
c. Quantity on hand
d. Reorder point
e. Breakeven point
f. EOQ
g. Standard cost.
15. A journal voucher contains:
a. Unique reference number
b. Journal entries
c. Explanation
d. Approved by and posted by information.
 16. GL Department- least likely to receive a copy of the sales order in the systems flowchart of the
Basic Technology Sales Order Processing System
17. The credit memo will be seen by all of the following departments:
a. Credit
b. Billing
c. Inventory
d. AR
18. Sales Order Processing System
a. Receive order
b. Check credit
c. Pick goods
d. Ship goods
e. Bill customer
f. Update inventory records
g. Update AR records
h. Post to GL
19. Revenue cycle- applies to retail, wholesale, and manufacturing organizations.
20. Data stores included in the DFD of Cash Receipts Procedures
a. AR Subsidiary Ledger
b. Journal Voucher File
c. Cash Receipt Journal
21. Billing Department- uses the Prices, Taxes and Freight reference database in the systems
flowchart of the Basic Technology Sales Order Processing System
22. Deposit slip- a written notification accompanying a bank deposit that details and groups the
funds (such as checks, bills, and coins) being deposited
23. As a general rule, smaller businesses tend to use less of technology and more of manual
procedures, whereas larger companies tend to utilize more of advanced technologies.
24. Bill of lading- NOT a formal contract between the seller and the buyer of goods.

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1. Segregation of Incompatible Duties- internal control in updating GL

2. A person in the GL department may perform the reconciliation of the cash prelist, deposit slips
and JVs as long as he is not the one maintaining the GL record itself such as the supervisor.
3. In the cash receipts procedure, the reconciliation of cash receipts and deposits is the last step
and it happens after updating the GL.
4. Characteristics of Revenue Cycle
a. The computers used in these systems are independent (non-networked) personal
computers (PCs).
b. Information between departments is communicated via hard-copy documents.
c. In addition, in such systems, maintaining physical files of source documents is critical to
the audit trail.
5. Major risks in the revenue cycle
a. Sale to unworthy customers
b. Incorrect shipping
 c. Incorrect record
d. Asset theft
e. Unauthorized access
6. Multilevel security- example of an IT control to address unauthorized access
7. Shipping notice- triggers the billing process
8. Credit department- approves the sales return
9. Validity check- example of the edit checks for online forms
10. Key processes, departments and documents & key risks and controls- items and concepts
should you as learners need to identify in the revenue cycle