Chapter Test - Expenditure Cycle
Chapter Test - Expenditure Cycle
2. Segregation of duties can help minimize the risk of inventory theft. Employees who are
responsible for controlling physical access to inventory should not be able to adjust
records without review and approval.
a. True
b. False
4. The combination of the supplier invoice and associated supporting documentation creates
a
a. Voucher package
b. Double bill
c. Nonvoucher system
5. The just-in-time inventory system attempts to minimize, if not totally eliminate, finished
goods inventory by purchasing and producing goods in response to forecast, rather than
actual sales.
a. True
b. False
6. Which of the following expenditure cycle activities can be eliminated through the use of IT
or reengineering?
a. Ordering goods
b. Approving vendor invoices
c. Receiving goods
d. Cash disbursements
7. What is the best control procedure to prevent paying the same invoice twice?
a. Segregate check-preparation and check-signing functions
b. Prepare checks only for invoices that have been matched to receiving reports and
purchase orders.
c. Require two signatures on all checks above a certain limit
d. Cancel all supporting documents when the check is signed.
9. Which of the following procedures is designed to prevent the purchasing agent from
receiving kickbacks?
a. Maintaining a list of approved suppliers and requiring all purchases to be made
from suppliers on that list
b. Requiring purchasing agents to disclose any financial investments in potential
suppliers
c. Requiring approval of all purchase orders
d. Prenumbering and periodically accounting for all purchase orders
10. Which document is used to record adjustments to accounts payable based on the return
of unacceptable inventory to the supplier?
a. Receiving
b. Credit memo
c. Debit memo
d. Purchase order
Part II- Matching Type. Match the following terms with their definitions.
A. Definition of terms
Terms Definitions
1. Economic order a. A document that creates a legal obligation to buy
quantity(EOQ) and pay for goods or services
2. Materials requirements b. The method used to maintain the cash balance in
planning(MRP) petty cash account.
3. Just-in-time inventory c. The time to reorder inventory triggered when the
system quantity on hand falls to a predetermined level.
4. Purchase requisition d. A document used to authorize a reduction in
accounts payable because merchandise has been
returned to a supplier.
5. Imprest fund e. An inventory control system that triggers
production based on forecasted sales
6. Purchase order f. An inventory control system that triggers
production based on forecasted sales
7. kickbacks g. A document used only internally to initiate the
purchase of materials, supplies, or services
8. Procurement card h. A process for approving supplier invoices based on
a two-way match of the receiving report and
purchase order
9. Blanket purchase i. A process for approving supplier invoices based on
order a three-way match of the purchase order, receiving
report, and supplier invoice.
10. Evaluated receipts j. A method of maintaining accounts payable in
settlement(ERS) which each supplier invoice is tracked and paid for
separately.
11. Disbursement voucher k. A method of maintaining accounts payable that
generates one check to pay for a set of invoices
from the same supplier.
12. Receiving report l. Combination of a purchase order, receiving report,
and supplier invoice that all relate to the same
transaction.
13. Debit memo m. A document used to list each invoice being paid by
a check.
14. Vendor-managed n. An inventory control system that seeks to minimize
inventory the sum of ordering, carrying and stockout costs.
15. Voucher package o. A system whereby suppliers are granted access to
point-of-sale(POS) and inventory data in order to
automatically replenish inventory levels
16. Nonvoucher system p. An agreement to purchase set quantities at
specified intervals from a specific supplier
17. Voucher system q. A document used to record the quantities and
condition of items delivered by a supplier
r. A special-purpose credit card used to purchase
supplies.
s. A fraud in which a supplier pays a buyer or
purchasing agent in order to sell its products or
services.
B. Match the threats in the left column to appropriate control procedures in the right column.
More than one control may be applicable.
b. Receiving-dock personnel steal inventory and then claim the inventory was sent to the
warehouse.
c. An unordered supply of laser printer paper delivered to the office is accepted and paid for
because the “price is right”. After all of the laser printers are jammed, however, it becomes
obvious that the “bargain” paper is of inferior quality.
d. The company fails to take advantage of a 1% discount for promptly paying a vendor
invoice.
e. The company is late in paying a particular invoice. Consequently, a second invoice is sent,
which crosses the first invoice’s payment in the mail. The second invoice is submitted for
processing and also paid.