ACC 409 Chapter 12 – Flashcards
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1) ________ is not a basic activity of the revenue cycle.
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Receiving
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If a firm does not use an ERP, the best way to mitigate the risk of the destruction of master data is to
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implement backup and disaster recovery procedures.
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If a firm uses an ERP, the best way to mitigate the risk of the destruction of master data is to
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implement the ERP system in three separate instances.
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Which of the decisions below is not ordinarily found as part of the revenue cycle?
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How often should accounts receivable be subjected to audit?
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Which of the following is not a key decision that needs to be made in the revenue cycle?
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Which vendor should inventory be purchased from?
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Consider the following revenue cycle scenario: The company has been exposed to customer dissatisfaction and the suggested control procedure to be implemented is to install and use bar-code scanners. What is the threat?
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The company may be shipping the wrong merchandise.
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In a revenue cycle with proper controls, the ________ who reports to the ________, is not involved in any cash handling activities.
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accounts receivable clerk; controller
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A serious exposure in the revenue cycle is loss of assets. What is the related threat and applicable control procedure that address this exposure?
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theft of cash; segregation of duties and minimization of cash handling
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Which of the following duties could be performed by the same individual and not violate segregation of duty controls?
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handling cash receipts and mailing vendor payments
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Which of the following is not a general threat to the revenue cycle?
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loss of customers
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The revenue cycle's primary objective is to
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provide the right product in the right place at the right time for the right price.
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Which of the following controls can minimize the threat of incomplete/inaccurate orders?.
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Restriction of access to master data.
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Which of the following controls can minimize the threat of theft of cash?
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Use of cash registers.
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Which of the following controls can minimize the threat of failure to bill?
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Separation of billing and shipping functions.
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Which of the following controls can minimize the threat of theft of inventory?
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Bar-code and RFID technology.
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Regularly reviewing an accounts receivable aging report can help management do what?
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spot firms who are falling behind in their payments
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Regularly reviewing an accounts receivable aging report can help management do what?
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determine whether changes are needed in the firm's credit policies
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T or F Shipping efficiency can often be improved by replacing RFID tags with bar codes.
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False
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During the sales order entry process, a ________ is performed to compare the quantity ordered with the standard amounts normally ordered.
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reasonableness test
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During the sales order entry process, a ________ is performed to verify that each transaction record contains all appropriate data items.
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completeness test
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The best solution for maintaining accurate automated perpetual inventory system is to use
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RFID tags.
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To ensure proper segregation of duties, only the ________ has authority to issue credit memos.
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credit manager
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It has been discovered that credit sales have been made to customers with a poor credit rating. If this continues, the company will face increasing uncollectible receivables and losses due to bad debts. Separation of duties between ________ and ________ should help resolve the problem.
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credit approval; marketing
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The manager of Callow Youth Clothing was entering an order online from Sad Clown Pajamas. He ordered 100 one-size fits all pajama bottoms, but when he ordered 1000 one-size fits all pajama tops, the following error message popped up: "Did you mean to enter a quantity of 1000 for your order?" This message is the result of a
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reasonableness test.
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The manager of Cezary Foods was purchasing inventory from Bogumil Distributors online. The manager entered the items and quantities, completed the checkout and payment process, but received the following error message before the order could be processed: "Please enter your phone number." This message is likely the result of a
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completeness test.
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Bogumil Distributors is an Internet-based wholesaler. Customers enter their orders online. The manager of Cezary Foods was entering an order when the following error message popped up: "Your order exceeds your available credit. You will be contacted within 8 hours." This message is the result of a
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limit check.
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A clerk at a grocery store scanned the bar code for a low cost bag of frozen chicken wings then gave his friend an expensive brand-name bag of frozen chicken wings. Which of the following controls would best prevent the clerk from getting away with doing this?
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Use of RFID tags.
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Which of the following poses an internal control problem?
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Sales representatives have authority to increase customers' credit limits in $1,000 increments.
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The least effective control for preventing an organization from processing fraudulent credit memo is to
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reconcile total of credit memos to total debits posted to customers' subsidiary ledgers.
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Which of the following is not a threat to the revenue cycle sales order entry process?
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cash flow problems
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The legitimacy of customer orders is established by ________ in paper-based customer orders.
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the customer's signature
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The legitimacy of customer orders is established by ________ in Internet-based customer orders.
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digital signatures
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For strongest segregation of duties, the credit manager should never report to
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the marketing department.
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For strongest segregation of duties, a sales representative should never be allowed to
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approve a sale on credit.
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T or F A credit sale should always be denied if it exceeds the customer's credit limit.
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False
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T of F A credit sale should always be reviewed by a credit manager if it exceeds the customer's credit limit.
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True
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Basic segregation of duties requires the credit manager reports to the ________ and the treasurer report to the ________.
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treasurer; vice president of finance
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When a customer places an order (on account) for a certain product, what should be done before the order is checked for inventory availability?
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The customer's available credit should be checked.
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How is credit approval generally handled for established customers with a documented payment history?
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General authorization by a sales clerk
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What is a typical procedure for processing sales orders from new customers or customers making a purchase that causes their credit limit to be exceeded?
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Specific authorization must be granted by the credit manager.
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Checking the quantity of inventory available before accepting a sales order is a good practice for all of the reasons except to
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verify the accuracy of the perpetual inventory records.
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Special software packages called ________ can help an organization manage customer service.
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CRM systems
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The activities involved in soliciting and processing customer orders within the revenue cycle are known as the
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sales order entry process.
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Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy Company. He is a product packer. The headphones give him computer-generated instructions so he knows the location of each item and quantity that should be included in the order. These instructions are the equivalent of a
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picking ticket.
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Identify a useful tool for monitoring accounts receivable.
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accounts receivable aging report
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An accounts receivable aging report is useful for doing everything except
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estimating future sales.
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It costs ________ times as much to acquire a new customer as it does to make a sale to an existing customer.
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five
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Research suggests which of the following is key to improving total customer satisfaction?
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quality and nature of customer contact after the sale
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A picking ticket is generated by the
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sales order entry process.
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Before a shipping notice is prepared during the revenue cycle, shipping department personnel should match the inventory received from the warehouse to the
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picking ticket and sales order.
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Matching customer account numbers and inventory item numbers to the numbers in the customer and inventory master files is an example of a
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validity check.
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Which of the following is not a threat to the revenue cycle shipping process?
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incomplete orders
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The ________ normally triggers the billing process in the revenue cycle.
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packing slip received from the shipping department
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The ________ should always be included with a merchandise shipment to a customer.
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packing slip
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The ________ is a legal contract that defines responsibility for goods that are in transit.
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bill of lading
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Two documents usually accompany goods shipped to a customer. What are the two documents?
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a packing slip and a bill of lading
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The shipping department at Eka Toys follows policies that determine which carrier will deliver orders according to the size, weight, and destination of the shipment. It maintains standing agreements with shippers that specify legal responsibility for the shipment while it is in transit. The terms of the shipping agreements are documented on
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bills of lading.
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The packing slip
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lists the quantity and description of each item included in the shipment.
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Key differences exist when an integrated Enterprise Resource Planning system (ERP) replaces an existing AIS or legacy system. For example, ________ are more accurate and timely, enabling sales order entry staff to provide customers more accurate information about delivery dates.
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inventory records
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By using an ERP to merge the billing, sales, and marketing functions, the firm may be able to
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use customer's past purchase history to send information about related products and services the customer may be interested in.
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T or F The bill of lading is a legal contract that defines responsibility for the goods in the company's warehouse
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False
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The basic document created in the billing process is call a ________.
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sales invoice
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A company uses the method for tracking accounts receivable where customers pay according to individual sales invoices. This describes the ________ method.
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open-invoice
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A method for tracking accounts receivable that matches specific invoices and payments from the customer is called a(n) ________ method.
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open-invoice
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The document a customer returns with their payment and that identifies the source and the amount of the payment is called a
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remittance advice.
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In the ________ method of tracking accounts receivable, customers pay according to the amount showing on their monthly statement and payments are applied against the total account balance.
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balance forward
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When a customer pays off the balance on an invoice, the payment is credited to the ________ file.
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customer master
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A type of business document in which part of the original document is returned to the source for further processing is called a ________ document.
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turnaround
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A document typically encountered in the revenue cycle that is both an output document and a source document is the
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sales invoice.
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A(n) ________ system prepares and mails monthly statements to customers throughout the entire month, instead of just at the end of the month.
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cycle billing
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The shipping department at Eka Toys follows policies that determine which carrier will deliver orders according to the size, weight, and destination of the shipment. It maintains standing agreements with shippers that specify legal responsibility for the shipment while it is in transit. The terms of the shipping agreements are documented on
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bills of lading.
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Which is the best control to prevent invoicing customers for more than the actual quantity shipped?
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Use the information from the packing slip to prepare the sales invoice.
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Separating the shipping and billing functions is designed to reduce the threat of
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failure to bill customers.
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All of the following edit checks for online editing of accounts receivable transactions would probably be included except
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check digit verification on the amount of the sale.
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The accounts receivable clerk destroys all invoices for sales made to family and friends and does not record the sales in the accounts receivable subsidiary ledgers. The family and friends usually give the clerk cash as a "thank you." Which procedure will not prevent or detect this fraud?
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send monthly statements to all customers with balances owed.
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Which of the following is not a threat to the revenue cycle billing process?
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loss of customers
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Upon notification from the receiving department that the goods have been returned, the manager issues a(n) ________ , which authorizes the adjustment of the customer's account.
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credit memo
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Suppose management wanted to increase the speed of processing customer payments. One way to speed up payment transaction processing is to
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use a FEDI.
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The cashier deposits checks for Benedek Incorporated and also prepares payments to vendors. Of the following, who is best able to reconcile the bank statement to Benedek's records on a regular basis?
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internal audit department
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A monthly statement sent to customers serves a control purpose by
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providing an opportunity for customers to verify the balance owed and activity on the account.
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Which of the following is not one of the controls when customer payments are commingled with other mail?
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requiring the controller to be personally present when mail is received and opened
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Segregation of duties controls dictates that the collection and recording functions be kept separate from each other. However, the accounts receivable department needs to know when customers pay their invoices. What is a solution to this potential internal control problem?
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all of the above
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The benefits of a lockbox arrangement with a bank are maximized when
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several banks around the country are used, in order to minimize the time payments spend in the mail.
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An ________ is an arrangement where a bank receives customer payments and transmits payment data to the organization.
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electronic lockbox
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Customers that send their payments electronically directly to the billing company's bank are using
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electronic funds transfer (EFT).
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A way to incorporate the advantages of Electronic Data Interchange with the Electronic Funds Transfer is
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Financial Electronic Data Interchange.
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When a proper segregation of duties exists in the area of handling cash receipts, the ________, who reports to the ________, actually handles the cash and is not the same person who posts cash receipts to customer accounts.
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cashier; treasurer
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Because it is the most fungible of all assets, the management of cash has always been the most difficult of all control issues. The most important of cash controls is
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segregation of duties.
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A number that enables customers to remit payments via an ACH credit without requiring the seller to divulge detailed information about its bank account is called
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UPIC.
