AIS10e Ch 11 - The Billing/Accounts Receivable/Cash Receipts (B/AR/CR) Process True/False and PDF

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The Billing/Accounts Receivable/Cash Receipts (B/AR/CR) Process True/False and MCQ...

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Chapter 11—The Billing/Accounts Receivable/Cash Receipts (B/AR/CR) Process TRUE/FALSE 1. The B/AR/CR process completes the order to cash process by accomplishing the activities of billing customers, managing customer accounts, and securing payment for goods and services rendered. ANS: T

PTS: 1

2. Recording B/AR/CR event data is generally the responsibility of the treasury department, which typically reports to the controller function. ANS: F

PTS: 1

3. Although both the treasurer and controller functions report to the VP of Finance, for good internal control, these functions should be segregated. ANS: T

PTS: 1

4. The credit department uses accounts receivable master data to complete several of their activities. ANS: T

PTS: 1

5. The goal for treasurers, who are responsible for managing an organization's cash resources, is to make funds available so that they can be used to acquire revenue-generating assets, be invested to earn interest, or be used to reduce debt, thus saving interest charges. ANS: T

PTS: 1

6. Float, when applied to cash receipts, is the time between payment by customer and the availability of funds on deposit and available for use. ANS: T 7. ANS: T

PTS: 1 Funds on deposit and available for use are known as good funds. PTS: 1

8. The AR master file address is a postal address, maintained by the firm's bank, which is used solely for the purpose of collecting checks. ANS: F

PTS: 1

9. Database systems are Internet based systems for sending bills/invoices to customers and receiving the customer payment electronically. ANS: F

PTS: 1

10. An invoice is a business document⎯either paper or electronic transmission⎯used to notify the customer of an obligation to pay the seller for merchandise which was ordered and shipped. ANS: T

PTS: 1

11. A purchasing statement is a business document designed to inform the payee of the invoices or other items being paid. ANS: F

PTS: 1

12. The accounts receivable master data is a repository of all unpaid invoices issued by an organization and awaiting final disposition. ANS: T 13. ANS: T

PTS: 1 The sales event data store contains invoice records. PTS: 1

14. Electronic bill presentment and payment (EBPP) systems are B2B systems that use a Web site to post customers' bills and to receive their electronic payments. ANS: F

PTS: 1

15. The three types of accounts receivable systems discussed in the text are the lockbox, balance-forward, and open-item systems. ANS: F

PTS: 1

16. In a balance-forward accounts receivable system, customer statements display previous balance, payments, and balance forward to which are added any new charges to derive the total balance due. ANS: T

PTS: 1

17. In an open-item accounts receivable system, customer statements display invoices (new or settled in the current period), along with payment details. ANS: T

PTS: 1

18. In a pre-billing system, invoices are prepared after the goods have been shipped and the sales order notification has been matched to the shipping's billing notification. ANS: F 19. ANS: F 20. ANS: T 21. ANS: T 22. system.

PTS: 1 In a post-billing system, invoices are prepared upon acceptance of the customer order. PTS: 1 The acronym EFT stands for electronic funds transfer. PTS: 1 The acronym ACH stands for automated clearing house. PTS: 1 A credit card system is better at reducing float time for the collector than a debit card

ANS: F

PTS: 1

23. In an open-item system, accounts receivable records consist of a customer's current balance due, past-due balance, and the finance charges and payments related to the account. ANS: F

PTS: 1

24. The B/AR/CR system supports the repetitive work routines of the credit department, the cashier, and the accounts receivable department. ANS: T

PTS: 1

25. A debit card is a method of payment whereby a third party, for a fee, removes from the collector the risk of non-collection of the account receivable. ANS: F

PTS: 1

26. A credit card is a form of payment authorizing the collector to transfer funds electronically from the payer's bank account to the collector's bank account. ANS: F

PTS: 1

27. Forced vacations is the only control procedure that can be used to help prevent or detect lapping. ANS: F

PTS: 1

28. The ACH network electronically transfers funds by crediting the collector's bank account and debiting the payer's bank account for the amount of a payment. ANS: T 29. ANS: F 30. ANS: T

PTS: 1 The payment event data contains the details of each payment received. PTS: 1 The stub attached to the customer statement is also known as a turnaround document. PTS: 1

31. The accounts receivable master data is created as sales returns, bad debt write-offs, estimated doubtful accounts, or similar adjustments are processed. ANS: F

PTS: 1

32. A lockbox is a postal address maintained by a third party⎯typically a bank⎯which is used solely for the purpose of collecting checks. ANS: T

PTS: 1

33. EFT includes wire transfers, credit and debit card processing, as well as payments made via the ACH Network. ANS: T

PTS: 1

34. An electronic bill presentment and payment (EBPP) system is a B2C system that uses a Web site to post customer bills and to receive electronic payments. ANS: T

PTS: 1

35. With the biller direct method of an electronic bill presentment and payment (EBPP) system, a company posts its bills/invoices to its own Web site (or to a Web site hosted by a third party) and sends an e-mail notification to its customers telling them that their bill has been posted. ANS: T

PTS: 1

36. With the consolidation/aggregation method of an electronic bill presentment and payment (EBPP) system, a company's bills are posted, along with bills from other companies, to a Web site hosted by a third party. Customers then go to that site to pay bills from a number of companies. ANS: T

PTS: 1

MULTIPLE CHOICE

a. b. c. d.

1. As discussed in the text, the functions of the B/AR/CR process: is identical to those of the order entry/sales process supports the problem-solving processes of marketing managers collects amounts due from customers is unrelated to the functions of the order entry/sales process

ANS: C

PTS: 1

2. According to the concept of segregation of duties, which of the following managers should report to the controller rather than to the treasurer? a. credit department manager b. accounts receivable department manager c. cashier d. investments manager ANS: B

PTS: 1

3. In an organization in which the OE/S and B/AR/CR processes are separate processes, the B/AR/CR process usually accomplishes all of the following activities except: a. picking goods in the warehouse b. billing customers c. managing customer accounts d. securing payment of customer accounts ANS: A

PTS: 1

4. Which of the following pairs of functions would you expect might report directly to the vice president of finance? a. credit department and controller b. shipping department and controller c. accounts receivable department and treasurer d. treasurer and controller ANS: D

PTS: 1

a. b. c. d.

5. Which of the following statements regarding Check 21 is false? It allows banks to exchange checks electronically. Before this system, paper checks were flown around the country from bank-to-bank to complete the check-clearing process. It requires that banks exchange check images. It significantly reduced float.

ANS: C

PTS: 1

6. Which of the following process bubbles (i.e., activities) would you not expect to see in the logical DFD for a B/AR/CR process? a. perform billing b. requisition inventory c. receive customer payment d. manage customer accounts ANS: B

PTS: 1

7. Which of the following normally would trigger the billing process in a B/AR/CR process? a. remittance advice b. shipping notice c. picking ticket d. customer acknowledgment ANS: B

PTS: 1

8. Which of the following normally would trigger the B/AR/CR process to record a customer payment? a. credit memo b. remittance advice c. deposit slip d. notice to the general ledger to record a cash receipt ANS: B

a. b. c. d.

PTS: 1

9. The principal master data that you would expect to see in a B/AR/CR process is the: sales order shipping notifications sales journal accounts receivable

ANS: D

PTS: 1

10. In a B/AR/CR process, which of the following data stores is least likely to interact with a process called "perform billing"? a. vendor master data b. customer master data c. accounts receivable master data d. sales event data ANS: A 11.

PTS: 1 In a logical DFD for a B/AR/CR process, which of the following data stores would

you expect to interact with a process called "manage customer accounts"? a. inventory master data b. accounts receivable master data c. sales event data d. cash receipts event data ANS: B

PTS: 1

12. In a logical DFD for a B/AR/CR process, you would expect that a credit memo would be sent by the B/AR/CR process to the customer from which of the following processes? a. perform billing b. manage customer accounts c. receive payment d. validate sales order ANS: B

a. b. c. d.

PTS: 1

13. Inputs to the B/AR/CR process normally could include all of the following except: a copy of the sales order sent by the sales order function to the billing function a shipping notice sent by the shipping function to the billing function customer acknowledgement remittance advice

ANS: C

PTS: 1

14. In general, adjustments to customer balances in the accounts receivable master data will be necessary for all of the following except: a. sales returns and allowances b. reversals of mispostings and other errors c. bad debt write-offs d. estimates of uncollectible accounts ANS: D

a. b. c. d.

PTS: 1

15. An invoice record usually contains all of the following elements except: the customer's credit limit customer's identification items and quantities billed invoice date

ANS: A

PTS: 1

16. In an entity-relationship (E-R) diagram for the B/AR/CR process, you would expect that the word trigger would appear between the boxes for? a. CUSTOMER and SHIPMENT b. CUSTOMER and SALES INVOICE c. STOCK PICK and SHIPMENTS d. SALES INVOICE and SHIPMENT ANS: C

PTS: 1

17. A company using a centralized database approach might not maintain a relational table for ACCOUNTS RECEIVABLE. Rather, accounts receivable balances at any point in time could be computed as the difference between the relations for which of the following continuous events? a. SHIPMENTS and SALES_INVOICES

b. c. d.

SALES_INVOICES and CASH_RECEIPTS SHIPMENTS and CASH_RECEIPTS CUSTOMER and SALES_INVOICES

ANS: B

a. b. c. d.

18. One type of accounts receivable system is balance-forward, the other is: debit card system Automated Clearing House system Electronic Funds Transfer system open-item system

ANS: D

a. b. c. d.

PTS: 1

PTS: 1

19. In a pre-billing system, invoices are prepared: immediately upon acceptance of a customer order when there is to be a delay between the time that the order is accepted and the time it is shipped where inventory balances can be determined only through physical count to improve customer relations

ANS: A

PTS: 1

20. In a fraud scheme known as ____, the perpetrator attempts to cover the theft of cash received from customer A by applying cash collected from customer B to A's account, then applying a receipt from C to B's account, and so forth. a. Kiting b. lapping c. schmoozing d. hacking ANS: B

a. b. c. d.

21. Deposit slips are usually generated by the B/AR/CR process: at the time invoices are prepared by manual procedures electronically as part of processing cash receipts

ANS: D

a. b. c. d.

PTS: 1

PTS: 1

22. Typically, the operations process goals of the B/AR/CR: vary, depending on the organization and its particular view of these processes remain the same for all organizations vary inversely with the information process goals are the same as the information process goals

ANS: A

PTS: 1

23. Which of the following control plans is most likely to appear in the input validity and input accuracy columns, but not in the input completeness column of a control matrix for the billing process? a. independent billing authorization b. reconcile input and output batch totals c. check for authorized prices, term, freight, and discounts

d.

procedures for rejected inputs

ANS: C

PTS: 1

24. For the cash receipts process, the control plan turnaround documents helps to achieve which of the following pairs of control goals? a. ensure input validity and ensure input completeness b. ensure efficient employment of resources and ensure input accuracy c. ensure input completeness and ensure input accuracy d. ensure security of resources and ensure input accuracy ANS: B

PTS: 1

25. In the cash receipts process, the control plan of immediately endorsing incoming checks is designed to achieve the control goal of: a. ensure the timely deposit of cash receipts b. ensure security of the cash asset c. ensure cash receipts input accuracy d. ensure cash receipts input completeness ANS: B

PTS: 1

26. In the billing process, the control plan of review shipped not billed sales orders (tickler file) helps to ensure: a. effectiveness of operations (timely billing) b. efficient employment of resources c. security of resources d. input accuracy ANS: A

PTS: 1

27. The B/AR/CR process comprises three different but related processes⎯namely, billing, accounts receivable, and cash receipts. Which of the following would not be an operations process goal for these three processes? a. ensure effectiveness of operations b. ensure AR master data update accuracy c. ensure efficient employment of resources d. ensure security of resources ANS: B

PTS: 1

28. A remittance advice generally would be recorded in which of the following pairs of data stores? a. customer master data and accounts receivable master data b. sales event data and accounts receivable master data c. accounts receivable adjustments data and accounts receivable master data d. cash receipts data and accounts receivable master data ANS: D

a. b. c. d.

PTS: 1

29. Digital images: help reduce paper in the B/AR/CR system may be scans of checks may be scans of remittance advices all of the above

ANS: D a. b. c.

d.

30. Which of the following statements is false? The typical B/AR/CR system assists in preparing internal and external reports. Cash receipts can be accelerated by using some form of EFT. The two types of adjustments that commonly result from a periodic review of the aging details of customer account balances are a recurring entry for estimated bad debts and a bad debt write-off. Cash receipts events data are comprised of one or more invoice records.

ANS: D

a. b. c. d.

c. d.

PTS: 1

32. Which of the following statements is false? The check and remittance advice trigger the receive payment process. A bank lockbox provides more protection for cash than a system where cash receipts are mailed to the payee company and then deposited. Good funds are funds on deposit and available for use. From the standpoint of reducing the collector's float, a customer check is a better payment method than a debit card.

ANS: D

a. b. c. d.

PTS: 1

31. Which of the following statements is true? In a pre-billing system, invoices are prepared after the goods have been shipped and the sales order notification has been matched to the shipping's billing notification. In a post-billing system, invoices are prepared upon acceptance of the customer order. Of the two types of billing systems discussed in the text, the pre-billing system requires the more accurate inventory records. Of the two types of billing systems discussed in the text, the pre-billing system is appropriate in situations where there is a significant delay between acceptance of the customer's order and the subsequent shipment.

ANS: C

a. b.

PTS: 1

PTS: 1

33. The B/AR/CR process completes the: billing process production process order-to-cash process inventory process

ANS: C

PTS: 1

34. Which of the following is not part of the horizontal information flows of the B/AR/CR process? a. accounts receivable aging report b. customer payment c. bank deposit d. customer invoice ANS: A

a. b.

PTS: 1

35. Which of the following is most commonly associated with the treasury function? recording of event data security of funds

c. d.

reporting of results of business events maintaining accounting records

ANS: B

PTS: 1

36. Which of the following segregation of duties is not required for the B/AR/CR business process controls to be effective? a. price authorization and billing b. treasury and controllership c. bank reconciliation and cash receipts d. all of these are required for effective control ANS: D

PTS: 1

37. Placing a customer's bills on a company's own Web site and sending an e-mail telling the customer that his or her bill is there is called: a. electronic funds transfer b. electronic bill presentment c. electronic bill payment d. electronic document management ANS: B

PTS: 1

38. The accounts receivable system in which all the accounts receivable master data contains individual open invoices, against which payments and other adjustments are applied: a. pre-billing system b. open-item system c. balance-forward system d. post-billing system ANS: B

a. b. c. d.

PTS: 1

39. The accounts receivable system typically used by utilities is the: pre-billing system open-item system balance-forward system post-billing system

ANS: C

PTS: 1

40. Quantities of items shipped to a customer would typically be found in the relational table for: a. CUSTOMERS b. SALES_RELATIONS c. BANKS d. DEPOSITS ANS: B

PTS: 1

41. The billing system in which the invoice is prepared after goods have been shipped and the sales order notification has been matched to shipping's billing notification is called a(n): a. post-billing system b. open-item system c. pre-billing system d. balance-forward system

ANS: A

PTS: 1

42. A billing system that can be used when there is little or no delay between the receipt of the customer order and the shipment of the goods is a: a. post-billing system b. open-item system c. balance-forward system d. pre-billing system ANS: D

PTS: 1

43. The technology that allows information on documents to be converted into machinereadable data through a scanner is called a(...