chapter 4

Question 1

physical phase

Answer 1

taking order, pulling stuff off shelf, box it up, ship it out, record sale

Question 2

financial phase

Answer 2

cash receipts

Question 3

department order for order processing system

Answer 3

1. sales (sales order)
2. credit (check credit)
3. warehouse (pick goods)
4. shipping (ship goods)
5. billing (bill customer)

Question 4

basic technology

Answer 4

no in real time processing, all manual

Question 5

restrictive endorsement

Answer 5

stamping checks for deposit only on the back

Question 6

cash receipts

Answer 6

is a batch item

Question 7

perpetual and periodic inventory concept

Answer 7

if company uses perpetual system for inventory, doesnt need to use it for financial reporting

Question 8

customer order –> sales order

Answer 8

standardization

Question 9

control for shipping dept

Answer 9

check what is supposed to be in the box is actually in the box

Question 10

shipping log

Answer 10

list of whats going out the door
- prepared by shipping dept

Question 11

documents used to reconcile what was received from warehouse by shipping dept

Answer 11

• packing slip
• shipping notice

Question 12

warehouse dept documents

Answer 12

• stock release – allows to release goods to shipping along with verified stock release
• warehouse employees adjust stock records to reflect inventory and prepare back-order records if insufficient goods

Question 13

billing dept documents

Answer 13

• sales journal : special journal used for recording completed sales transactions
• journal voucher : updates the general ledger control account

Question 14

bill of lading

Answer 14

• weight
• size
• dimensions

Question 15

cash receipt procedures

Answer 15

person #1 : open mail and prepare remittance list
–> open areas, camera, supervision
person #2 : record and deposit checks (custody)
person #3 : update AR records (recording)

**all 3 values must agree

• update general ledger
• reconcile cash receipts and deposits (done by employee not involved in cash receipts process)
  –> copy of prelist, deposit slips, and related journal vouchers

Question 16

physical systems

Answer 16

basic tech, purely manual
1. customer places order
2. sales dept creates sales order
3. credit dept verified credit and approves order
4. warehouse sends inv to shipping and records inv reduction
5. shipping reconciles order, prepares bill of lading, ships items, records transactions and sends stock release to billing
6. billing bills customer and updates sales journal
7. AR and inv clerks update subsidiary ledgers

Question 17

3 choices if inventory is increasing

Answer 17

1. more sales
2. inventory rotting
3. employees stealing

2 &3 if sales arent going up

Question 18

advanced technology

Answer 18

done in real time
** lighting bolts

Question 19

revenue cycle risks

Answer 19

• input errors (human error)
  –> use IT controls
• selling to uncreditworthy customers
  –> segregate duties btwn transaction authorization and transaction processing
• ship incorrect items or quantities
  –> indep verification or scanner tech and automated ordering
• inaccurately recording transaction
  –> reconciliation and separation of duties
• misappropriation of cash receipts and inv (ppl stealing $)
  –> supervision, segregation
• unauth access to AR and reports
  –> access controls and segregation of duties, so it requires collusion

Question 20

sales return fraud

Answer 20

fav way to steal

Question 21

sales return transaction

Answer 21

sales return and allowance XX
cash XX

sales return and allowance = temporary, contra revenue account

Question 22

sales return transaction with AR

Answer 22

sales return and allowance XX
accounts receivable XX

Question 23

estimated sales return or accruing

Answer 23

sales return and allowance XX
sales allowance XX

** if accruing, cant credit AR bc you dont know who will return and whos AR to reduce

Question 24

credit memo

Answer 24

control
anytime you reduce someones receivable, other than damage, manager will look at it

Question 25

retail environment sales return

Answer 25

- favorite way of stealing - excuse for where $ went - register will now balance

Question 26

4 rivers gainesville

Answer 26

- 40K embezzlement - 350 fraudulent cash returns from sept - jan - no customers were present when making return - cash drawer already removed - checked surroundings - 12 in a row returns for 59.32, & 892

Question 27

point of sale systems

Answer 27

retailers that dont extend credit ex: chick fil a, publix

Question 28

universal product code (UPC)

Answer 28

standardized UPC code scan product --> controls of processes of price list - connected to inventory - and has a standard price list

Question 29

system will auto calculate...

Answer 29

- taxes --> some items taxes, some arent - discounts --> BOGO, coupons

Question 30

flow

Answer 30

how much cash you start in drawer to make change

Question 31

3rd party intermediary

Answer 31

financial institution that verifies card and funds ** oval on flowchart

Question 32

cash receipts at end of day

Answer 32

get uploaded as a batch

Question 33

self checkout controls

Answer 33

- weight - cameras - worker supervision

Question 34

@ end of shift need to

Answer 34

reconcile drawers

Question 35

POS control issues

Answer 35

- authorization --> customer signature must match credit card - supervision --> cameras and floor security to prevent theft and employee fraud - access control --> separate cash drawers - accounting records --> only supervisors should access internal cash register tapes - indep verification --> cash drawers should ne reconciled to internal register tapes