AIS Chap 12 test blank PDF

Preview

Summary

test blank for AIS test. Thailanddddd...

Description

12.1 Describe the basic business activities and related information processing operations performed in the revenue cycle. 1) Basic segregation of duties requires the credit manager reports to the ________ and the treasurer report to the ________. A) treasurer; controller B) treasurer; vice president of finance C) controller; vice president of finance D) marketing manager; vice president of finance Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 2) The ________ normally triggers the billing process in the revenue cycle. A) sales order received from the sales department B) picking ticket received from the sales department C) packing slip received from the shipping department D) journal voucher received from the shipping department Answer: C Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 3) The ________ normally triggers the customer payment recording process. A) sales invoice B) deposit slip C) remittance advice D) customer monthly statement Answer: C Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 4) The ________ should always be included with a merchandise shipment to a customer. A) picking ticket B) packing slip C) sales invoice D) remittance advice Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 1 Copyright © 2015 Pearson Education, Inc.

5) According to generally accepted accounting principles, a sale is recognized when A) cash is received from the customer. B) inventory is removed from the warehouse. C) inventory becomes the legal property of the customer. D) a sales order is approved by sales, inventory control, and credit departments. Answer: C Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 6) ________ is not a basic activity of the revenue cycle. A) Sales order entry B) Shipping C) Receiving D) Billing Answer: C Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 7) When a customer places an order (on account) for a certain product, what should be done before the order is checked for inventory availability? A) The customer's available credit should be checked. B) The sales order should be created and written to a file. C) Shipping should be notified of an order in process. D) A picking list should be generated for the warehouse. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 8) How is credit approval generally handled for established customers with a documented payment history? A) A new credit application is requested. B) General authorization by a sales clerk C) Specific authorization by the credit manager D) A formal credit check should be made for each sale. Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic

2 Copyright © 2015 Pearson Education, Inc.

9) 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? A) General authorization to approve the order is given to sales clerks. B) Specific authorization must be granted by the credit manager. C) The sale should be rejected. D) The sales clerk should order a report from a credit bureau before approving the order. Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 10) Checking the quantity of inventory available before accepting a sales order is a good practice for all of the reasons except to A) determine which items may need to be back ordered. B) verify the accuracy of the perpetual inventory records. C) inform the customer about availability and delivery times. D) update inventory records to reduce the quantity available by the number of items ordered. Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 11) Special software packages called ________ can help an organization manage customer service. A) EDI systems B) CRM systems C) POS systems D) VMI systems Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 12) The ________ is a legal contract that defines responsibility for goods that are in transit. A) bill of lading B) packing slip C) back order D) picking list Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic

3 Copyright © 2015 Pearson Education, Inc.

13) Two documents usually accompany goods shipped to a customer. What are the two documents? A) a bill of lading and an invoice B) a packing slip and a bill of lading C) an invoice and a packing slip D) an invoice and a sales order Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 14) The basic document created in the billing process is call a ________. A) bill of lading B) sales invoice C) sales order D) packing list Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 15) A company uses the method for tracking accounts receivable where customers pay according to individual sales invoices. This describes the ________ method. A) monthly statement B) open-invoice C) balance forward D) cycle billing Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 16) A method for tracking accounts receivable that matches specific invoices and payments from the customer is called a(n) ________ method. A) specific identification B) balance forward C) cycle billing D) open-invoice Answer: D Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic

4 Copyright © 2015 Pearson Education, Inc.

17) The document a customer returns with their payment and that identifies the source and the amount of the payment is called a A) remittance advice. B) remittance list. C) credit memorandum. D) debit memorandum. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 18) 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. A) specific identification B) open-invoice C) balance forward D) remittance advice Answer: C Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 19) When a customer pays off the balance on an invoice, the payment is credited to the ________ file. A) customer master B) sales transaction C) cash receipts master D) All of the above are correct. Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Reflective Thinking 20) A type of business document in which part of the original document is returned to the source for further processing is called a ________ document. A) feedback B) returnable C) closed-loop D) turnaround Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic

5 Copyright © 2015 Pearson Education, Inc.

21) A document typically encountered in the revenue cycle that is both an output document and a source document is the A) sales invoice. B) customer purchase order. C) sales order. D) packing slip. Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 22) A(n) ________ system prepares and mails monthly statements to customers throughout the entire month, instead of just at the end of the month. A) continuous B) open-invoice C) cycle billing D) balance forward Answer: C Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 23) The activities involved in soliciting and processing customer orders within the revenue cycle are known as the A) sales order entry process. B) shipping order process. C) revenue process. D) marketing process. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 24) 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 A) picking ticket. B) bill of lading. C) packing slip. D) sales order. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic

6 Copyright © 2015 Pearson Education, Inc.

25) 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 A) picking tickets. B) packing slips. C) bills of lading. D) RFID tags. Answer: C Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 26) The accounts receivable management method typically used by credit card companies is A) balance forward. B) postbilling. C) monthly statement. D) open-invoice. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 27) Describe the basic revenue cycle activities. Answer: The revenue cycle is a recurring set of business activities and related information processing operations associated with providing goods and services to customers and collecting cash in payment for those sales. The basic activities in the revenue cycle are: order entry — soliciting and processing customer activities — filling customer orders and shipping merchandise — invoicing customers and maintaining customer accounts collections — the cashier handles remittances and deposits them in the bank; accounts receivable personnel credits customer accounts for the payments received. Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 28) Define and describe benefits of a CRM system. Answer: CRM stands for customer relationship management. Since customer service is so important today, special CRM software packages have been created that support this vital process. CRM systems help a company to organize detailed data about customers so that more personalized service can be given to them. A CRM system may retain customer preferences and customer transaction history, which can be used to suggest other products the customer may wish to purchase. The system could also take a pro-active marketing approach in contacting customers at certain re-order points. A well-implemented CRM system can help the business achieve the goal of turning satisfied customers into loyal customers. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 7 Copyright © 2015 Pearson Education, Inc.

29) How can Electronic Data Interchange (EDI) facilitate the billing and accounts receivable process? Answer: The basic document created in the billing process is the sales invoice. Many companies still print paper invoices and send them to customers in the mail. Batch processing of invoices may create cash flow problems because of the time it takes invoices to flow through the regular mail system. Companies that use EDI can create quicker turnaround for payment, and save costs by reducing paper handling and processing. Depending on the number of invoices processed per year, these savings can be significant. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 30) Describe typical credit approval procedures. Answer: Most business-to-business sales are made on credit. Key to revenue cycle success is the approval of credit sales before they are processed and goods shipped. A part of good control in this area is to establish a credit limit for customers. With new customers, or when orders exceed a customer's credit limit, or the customer has a past due balance, specific authorization for the credit manager should specifically authorize and approve further credit. The system can also be programmed to do a limit check for each order processed to maintain further control in this area. Also, marketing personnel should not make credit decisions, as a potential conflict of interest is possible. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 31) Describe the two methods to manage accounts receivable. Answer: Open invoice system — customers pay the invoice by returning a remittance advice turnaround document and a check. Remittances are applied against specific open invoices. The open-invoice method can be used to offer discounts for prompt payments since invoices are individually tracked. However, such individual tracking adds complexity in maintaining information. Balance-forward method — customers pay according to the amount shown on a monthly statement and remittances are applied against the total outstanding balance; this method is used by department stores typically where customers make a large number of smaller dollar amount purchases. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 32) Describe cycle billing and identify how an organization might benefit by using cycle billing. Answer: Cycle billing is spreading out the customer base so that a portion of the billing is done each day to a group of customers. Credit card and utility companies use it extensively because of their large customer bases. The advantage of this method is that the billing load is dispersed and the cash flow of the company is evened out dramatically. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 8 Copyright © 2015 Pearson Education, Inc.

33) Discuss ways in which technology can be used to streamline cash collections. Answer: Answers may include the following points: A lockbox system can reduce delays due to processing and geographical distance between customer and company. Customers send remittances to a nearby P.O. bDifficulty :ox; a local bank picks up remittances, deposits cash and sends remittance advices and copies of all checks to the company. The main disadvantage is cost; the banks charge a service fee up to 1% of the cash processed through the system. Information technology can provide additional efficiencies in the use of lockboxes. An electronic lockbox sends electronic notification of remittances to the company. This method enables the company to begin applying remittances to customer accounts before the photocopies of the checks arrive. — An EFT system eliminates paper checks and uses electronic payments between banks. Integrating EFT and EDI, called the financial electronic data interchange, automates billing and cash collections. — Procurement cards or credit cards can be used. These cards eliminate the risks and costs associated with creating and maintaining accounts receivable, but cost between 2% to 4% of the gross sales price. Objective: Learning Objective 1 Difficulty: Difficult AACSB: Analytic 34) If a firm does not use an ERP, the best way to mitigate the risk of the destruction of master data is to A) implement backup and disaster recovery procedures. B) use an ERP. C) proper segregation of duties. D) use of multiple master data files. Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 35) If a firm uses an ERP, the best way to mitigate the risk of the destruction of master data is to A) frequently update the ERP system. B) implement the ERP system in three separate instances. C) periodically audit the ERP system. D) integrate the ERP system with all IT functions. Answer: B Objective: Learning Objective 1 Difficulty: Difficult AACSB: Analytic

9 Copyright © 2015 Pearson Education, Inc.

36) Identify a useful tool for monitoring accounts receivable. A) ERP exception report B) accounts receivable aging report C) accounts receivable tolerance report D) customer credit limit report Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 37) An accounts receivable aging report is useful for doing everything except A) estimating bad debts. B) estimating future sales. C) projecting the timing of future cash flows. D) deciding whether to increase a specific customer's credit limit. Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 38) It costs ________ times as much to acquire a new customer as it does to make a sale to an existing customer. A) two B) five C) eight D) ten Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 39) Research suggests which of the following is key to improving total customer satisfaction? A) price of product B) speed of shipping C) quality and nature of customer contact after the sale D) quality and nature of customer contact before the sale Answer: C Objective: Learning Objective 1 Difficulty: Difficult AACSB: Analytic

10 Copyright © 2015 Pearson Education, Inc.

40) A picking ticket is generated by the A) shipping process. B) sales order entry process. C) packing process. D) billing process. Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 41) A picking ticket is generated by the A) shipping process. B) sales order entry process. C) packing process. D) billing process. Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 42) The packing slip A) lists the quantity, price, and description of each item included in the shipment. B) lists the price and description of each item included in the shipment. C) lists the quantity and description of each item included in the shipment. D) lists the quantity and price of each item included in the shipment. Answer: C Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 12.2 Discuss the key decisions that need to be made in the revenue cycle, and identify the information needed to make those decisions. 1) Which of the decisions below is not ordinarily found as part of the revenue cycle? A) What credit terms should be offered? B) How often should accounts receivable be subjected to audit? C) How can customer payments be processed to maximize cash flows? D) What are the optimal prices for each product or service? Answer: B Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic

11 Copyright © 2015 Pearson Education, Inc.

2) 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. A) inventory records B) cash receipts C) credit approval decisions D) exception reports Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 3) Which of the following is not a key decision that needs to be made in the revenue cycle? A) How should merchandise be delivered to customers? B) Should credit be extended to customers? C) How can customer payments be processed to maximize cash flow? D) Which vendor should inventory be purchased from? Answer: D Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 4) Regularly reviewing an accounts receivable aging report can help management do what? A) spot firms who are falling behind in their payments B) identify customers who have not purchased anything lately C) improve the speed which customers make payments D) determine whether the firm's pricing policy is effective Answer: A Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 5) Regularly reviewing an accounts receivable aging report can help management do what? A) identify customers who have not purchased anything lately B) determine whether changes are needed in the firm's credit policies C) improve the speed which customers make payments D) determine whether the firm's pricing policy is effective Answer: B Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic

12 Copyright © 2015 Pearson Education, Inc.

6) By using an ERP to merge the billing, sales, and marketing functions, the firm may be able to A) bill the customer right after the sale occurs. B) market products and services on bills sent to customers. C) use customer's past purchase history to send information about related products and services the customer may be interested in. D) eliminate the need for a firm to have a billing, sales, and marketing department. Answer: C Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 7) Suppose management wanted to increase the speed of processing customer payments. One way to speed up payment transaction processing is to A) use a FEDI. B) use JEDI analysis software. C) e...