Deck 9: The Revenue Process

Question 1

What are the activities encompassed by the revenue process?

A) Advertising, promotion and sales order solicitation
B) Sales order receipt and processing
C) Shipping
D) All of the above are activities of the revenue process.

Answer 1

D

Question 2

With which of the methods of payment application for open item accounts is a person required to identify the open invoices being paid, as well as any credits being taken?

A) Automatic identification
B) Post-identification
C) Pre-identification

Answer 2

C

Question 3

What is the most critical report for shipping activities?

A) Picking list
B) Remittance advice
C) Credit memorandum
D) FOB

Answer 3

A

Question 4

Which of the following is true regarding the open item method of accounting for accounts receivable?

A) Payments are applied to the outstanding balance rather than to particular invoices.
B) Invoice records remain in the open invoice file until payment is received.
C) The open invoice file is archived at the end of the period.
D) No attempt is made to match individual payments and invoices.

Question 5

What is the location at which title to goods changes from the shipping organization to the customer known as?

A) Picking list
B) Cash and carry
C) Standing orders
D) FOB point

Question 6

What is the spreading of customer billing throughout the month by dividing customer accounts into groups and billing each group at a different time during the month known as?

A) Preauthorization billing
B) Remittance billing
C) Cycle billing
D) Rotation billing

Question 7

The revenue process encompasses which of the following?

A) Events related to the acquisition of goods and services
B) Events related to the transformation of raw materials into finished goods
C) Events related to the distribution of goods and services to customers
D) Events necessary to keep general ledger accounts up-to-date

Question 8

Which of the following is not a method of payment application for open item accounts?

A) Automatic identification
B) Intermittent identification
C) Pre-identification
D) Post-identification

Question 9

What are the principal events to be recorded in the revenue process?

A) Sales orders in the sales order module
B) Shipping order
C) Billing of the customer
D) Receipt of cash from customers
E) All of the above are principal events to be recorded in the revenue process.

Question 10

Which of the following is included in the revenue process?

A) Contra accounts
B) Sales order processing
C) Vendor invoicing
D) Inventory management

Question 11

Which of the following is not true regarding the open item method of accounting for accounts receivable?

A) Invoice records remain in the open invoice file until payment is received.
B) Payments are correlated with individual invoices.
C) Straightforward information is provided for the preparation of an aging schedule.
D) No attempt is made to match individual payments and invoices.

Question 12

Which of the following methods is the most commonly used payment application for open item accounts?

A) Automatic identification
B) Post-identification
C) Pre-identification
D) Intermittent identification

Question 13

Which of the following is a control document for cash receipts?

A) Remittance advice
B) Credit memorandum
C) FOB
D) Picking list

Question 14

Which of the following is not included in the revenue process?

A) Shipping
B) Accounts receivable
C) Payment of stock dividends
D) Sales order processing

Question 15

Which type of report lists individual invoices by customer?

A) Detailed aging
B) Summary aging
C) Exclusive aging
D) Proprietary aging

Question 16

An aging accounts receivable report is commonly used for which of the following purposes?

A) As a tool for contacting customers regarding overdue amounts
B) As a basis for calculating the bad debt provision
C) As a tool for writing off small, miscellaneous, delinquent amounts
D) All of the above are purposes of an aging accounts receivable report.

Question 17

What is(are) the method(s) of accounting for accounts receivable?

A) Balance forward
B) Open item
C) Both A and B are methods of accounting for accounts receivable.
D) Neither balance forward nor open item is an appropriate method.

Question 18

Which of the following is not true regarding the balance forward method of accounting for accounts receivable?

A) Payments are applied to the outstanding balance rather than to particular invoices.
B) No attempt is made to match individual payments and invoices.
C) Invoice records remain in the open invoice file until payment is received.
D) The open invoice file is archived at the end of the period.

Question 19

Which of the following is true regarding the balance forward method of accounting for accounts receivable?

A) Payments are applied to the outstanding balance rather than to particular invoices.
B) Payments are correlated with individual invoices.
C) Invoice records remain in the open invoice file until payment is received.
D) Invoice records remain open at the end of the period.

Question 20

What document identifies the products and quantities ordered and gives the warehouse location, aisle number, shelf position, bin number, or other reference to the location of the goods?

A) FOB
B) Picking list
C) Remittance advice
D) Credit memo

Question 21

In the balance forward system, invoices are regarded as open only during the current period, and the open invoice file is archived at the end of the period.

Question 22

While advertising, promotion, and sales solicitations are functions in the business revenue process, the costs of these activities are accounted for in which process(es)?

A) The purchases and financial processes
B) The inventory process
C) The revenue process
D) The financial process

Question 23

What is the purpose of sales analysis reporting?

A) It gives management a basis for judging the performance of individual sales personnel.
B) Customers providing disappointing gross profit on the sales dollar may be identified.
C) Historical sales data are used to provide planning and control information for managers.
D) All of the above are valid purposes of sales analysis reports.

Question 24

Which of the following actions result from a pledge (with agreement to pay) to a non- profit organization?

A) A receivable is recorded.
B) The cash receipts transaction file increases by one record.
C) A purchase order is generated.
D) The open invoice file record is closed.

Question 25

Which of the following controls ensures the accuracy of transactions in the revenue process?

A) Every transaction is reviewed at the end of the month.
B) Independent checks should be made to ascertain that the correct prices are being charged to pre-approved customers.
C) Invoice quantities and amounts should be verified against the sales order and shipping records, with discrepancies reported if over a certain amount.
D) All of the above ensure the accuracy of transactions in the revenue process.

Question 26

The revenue process includes not only reporting but also facilitating and controlling certain business processes of the firm.

Question 27

Which of the following is an action that follows the shipment notification to a customer in the revenue process of a merchandising or manufacturing organization?

A) Creation of a sales transaction file record.
B) Closing of the open purchase order file record.
C) Updating the inventory master file.
D) Creation of the vendor receipt file.

Question 28

Which of the following is an application of the recurring entry concept?

A) Automatic identification
B) Standing orders
C) New orders
D) Remittance advice

Question 29

The process that encompasses events related to the distribution of good and services to customers and the receipt of money in exchange for these goods and services is known as what process?

A) The purchasing process
B) The financial process
C) The revenue process
D) The inventory process

Question 30

A prompt payment term such as "2/10:n/30" means which of the following?

A) The gross amount is due in ten days.
B) The customer can earn a 2% cash discount by paying within 10 days of the invoice date.
C) The customer can earn a 10% cash discount by paying within 2 days of the invoice date.
D) The customer can earn a 10% cash discount by paying within 30 days.

Question 31

Which of the following is effected through the sales order module?
A Issuance of sales orders.
B) Monitoring of outstanding sales orders.
C) Reporting on the time it takes to fill sales orders.
D) All of the above.

Question 32

Sales, sales order processing, shipping, and accounts receivable are all part of which of the following processes?

A) The financial process
B) The revenue process
C) The purchasing process
D) The inventory process

Question 33

Which of the following is an action resulting from the "receipt of cash" trigger in a sales- support organization?

A) Adding to the open customer invoice file.
B) Creation a sales transaction file record.
C) Creation of a cash receipts transaction file record.
D) Collection of transaction-based query information.

Question 34

For sales analysis reporting, one of the most important factors is which of the following?

A) Precise data
B) Relevant data
C) Timely data
D) Product data

Question 35

Which of the following represent cash handling risks in the revenue process?

A) Misappropriation of cash receipts.
B) Improper reconciliation of the cash account.
C) Uncollectible accounts written off without proper authorization.
D) All of the above are associated with cash handling risks in the revenue process.

Question 36

From time to time, an organization may decide to write off old, small amounts of accounts receivable because of which of the following?

A) Customers have taken discounts that they have not earned.
B) Customers have taken allowances promised by salespeople that have not been recognized with billing.
C) The amount is less than $20 and over ninety days old.
D) All of the above may cause an organization to decide to write off small, apparently uncollectible amounts.

Question 37

If a customer's payment is delayed for an excessive period of time, what is the appropriate notice to be sent?

A) An invoice
B) A statement
C) A dun
D) A discount

Question 38

Which type of report lists individual past due invoices by customer?

A) Detailed A/R aging.
B) Summary aging.
C) Customer master file.
D) Vendor master file.

Question 39

Which of the following represents the proper segregation of duties in the revenue process?

A) The person who handles deposits also reconciles the cash account.
B) A clerk in the treasury office opens mail and posts cash receipts.
C) The inventory management and shipping functions are in different buildings.
D) Sales representatives can check on the status of shipments and make adjustments to the order.

Question 40

In the open item system, payments are applied to the outstanding balance rather than against particular invoices.

Question 41

The discounts taken report is an output of the inventory process.

Question 42

A significant disadvantage of the balance forward method is the difficulty in resolving specific items disputed by a customer since they no longer appear in the active files.

Question 43

A remittance advice is used as a source document for entering receipts in the cash receipts transaction file.

Question 44

A detailed aging of open item accounts lists individual invoices by customer.

Question 45

A detailed aging report of open item accounts lists individual invoices by customer, whereas a summary aging report requires only one line for each customer with all invoices for a single customer combined.

Question 46

One requirement of a good audit trail in the revenue process is that it enables you to trace from source documents to transaction files, to master files, to open invoice file, to data transferred to the GL

Question 47

While advertising, promotion, and sales solicitations are functions in the business revenue process, the costs of these activities are accounted for in the purchases and financial processes.

Question 48

Standing orders represent an application of the recurring entry concept.

Question 49

The primary purpose of the revenue process is to summarize data and report on the overall financial progress and status of the firm.

Question 50

Using the pre-identification method for recording customer payments, the accounting system matches the remittances with specific open items using a type of artificial intelligence program

Question 51

A risk associated with the inventory process includes pricing changes not being properly recorded.

Question 52

The revenue activities for a merchandising organization progress from advertising and soliciting orders; to recording and acknowledging a sales order; to shipping the order; to billing the customer; to collecting, recording and depositing cash from the customer.

Question 53

If goods are shipped by a common carrier, a shipping document provides a contract between the shipper and the carrier.

Question 54

The most common report for the revenue process is an aging of accounts receivable.

Question 55

Inventory management and file maintenance should be handled by the inventory supervisor.

Question 56

Preparing an aging schedule for balance forward accounts is straightforward even though no detail may be available before the current period.

Question 57

A sales return involves a partial reduction of sales revenue.

Question 58

A sales order identifies the products and quantities ordered and gives the warehouse location, aisle number, shelf position, bin number, or other reference to the location of the goods.

Question 59

Purposes of the revenue cycle include not only reporting, but also the facilitation and control of certain business activities.

Question 60

When a retail cash sale is made the transaction is recorded in only the sales transaction file.

Question 61

When is it necessary to have a sales order processing module in the revenue process?

Question 62

List and explain three of the common control activities associated with sales and billing.

Question 63

Describe three of the functions typically found in the sales order function.

Question 64

List two of the three actions that result from the collection of an accounts receivable for a sales-supported organization.

Question 65

Give two examples of data verification controls found in the revenue process.

Question 66

What is the difference in the balance forward and the open item methods of accounting for customer accounts?

Question 67

What are the principal events to be recorded in the revenue process?

Question 68

Define "balance forward" and "open item" billing. List an advantage of each type of billing process.

Question 69

List five of the six actions that result from a shipment notification (shipment to a customer) in a merchandising or manufacturing organization.

Question 70

List and explain three examples of information processing authorization controls.

Question 71

Describe cycle billing and its advantages.

Question 72

Discuss the advantages of a computerized accounting information system for recording payments.

Question 73

What is the difference between credit limit, credit rating, and credit hold?

Question 74

List and discuss two exception-type reports generated in the revenue process related to the collection accounts receivable and how a manager would make use of these reports.

Question 75

Explain why gross profit analysis is more useful than sales analysis.

Question 76

Why is preparing an aging schedule for balance forward accounts more difficult than for open item accounts?

Question 77

List two exception-type reports that would be generated in the revenue process related to the collection of accounts receivable.