Accounting Quiz

The term "receivables" refers to

• cash to be paid to creditors.

• cash to be paid to debtors.

• merchandise to be collected from individuals or companies.

• amounts due from individuals or companies.

The entry to record merchandise returned to the seller includes a

• debit to either Sales Returns and Allowances or Sales Revenue.

• debit to Sales Returns and Allowances.

• credit to Inventory.

• debit to Sales Revenue.

When an account becomes uncollectible and must be written off,

• Allowance for Doubtful Accounts should be credited.

• Bad Debt Expense should be credited.

• Accounts Receivable should be credited.

• Sales should be debited.

Trade accounts receivable are valued and reported on the statement of financial position

• in the investment section.

• at gross amounts less sales returns and allowances.

• only if they are not past due.

• at cash realizable value.

Cash realizable value is the difference between the

• account receivable balance and the allowance account balance.

• Net sales and the allowance account balance.

• accounts receivable balance and bad debt expense.

• Net sales and bad debt expense.

Which of the following is not one of the main factors that contribute to fraudulent activity?

• Opportunity

• Segregation of duties

• Financial pressure

• Rationalization

Which one of the following is not an objective of a system of internal controls?

• Increase efficiency of operations

• Overstate liabilities to be conservative

• Enhance the accuracy and reliability of accounting records

• Safeguard company assets

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

• increases the potential for errors and irregularities.

• is a good example of safeguarding the company's assets.

• decreases the potential for errors and irregularities.

• is an example of good internal control.

An example of poor internal control is

• one person should be responsible for handling related transactions.

• the accountant should not have physical custody of the asset nor access to it.

• the custodian of an asset should not maintain or have access to the accounting records.

• a salesperson makes the sale, and a different person ships the goods.

Maximum benefit from independent internal verification is obtained when

• discrepancies are reported to management.

• it is done by the employee possessing custody of the asset.

• it is done at the time of external audit.

• it is made on a pre-announced basis.