Chapter 5—The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures TRUE/FALSE 1. Purchasing decisions are authorized by inventory control. ANS: T 2. The blind copy of the purchase order that goes to the receiving department contains no item descriptions. ANS: F 3. Firms that wish to improve control over cash disbursements use a voucher system. ANS: T 4. In a voucher system, the sum of all unpaid vouchers in the voucher register equals the firm’s total voucher payable balance. ANS: T 5. The accounts payable department reconciles the accounts payable subsidiary ledger to the control account. ANS: F 6. The use of inventory reorder points suggests the need to obtain specific authorization. ANS: F 7. Proper segregation of duties requires that the responsibility approving a payment be separated from posting to the cash disbursements journal. ANS: T
8. A major risk exposure in the expenditure cycle is that accounts payable may be overstated at the end of the accounting year. ANS: F 9. When a trading partner agreement is in place, the traditional three way match may be eliminated. ANS: T 10. Authorization of purchases in a merchandising firm occurs in the inventory control department. ANS: T 11. A three way match involves a purchase order, a purchase requisition, and an invoi ce. ANS: F
12. Authorization for a cash disbursement occurs in the cash disbursement departmen t upon receipt of the supplier’s invoice. ANS: F
13. An automated cash disbursements system can yield better cash management sin ce payments are made on time. ANS: T
14. Permitting warehouse staf to maintain the only inventory records violates separati on of duties. ANS: T
15. A purchasing system that employs electronic data interchange does not use a pur chase order. ANS: F
16. Inventory control should be located in the warehouse. ANS: F
17. Inspection of shipments in the receiving department would be improved if the doc umentation showed the value of the inventory. ANS: F
18. One reason for authorizing purchases is to enable efficient inventory management . ANS: T
19. If accounts payable receives an invoice directly from the supplier it needs to be re conciled with the purchase order and receiving report. ANS: T
20. Supervision in receiving is intended to reduce the theft of assets. ANS: T
MULTIPLE CHOICE
1. The purpose of the purchase requisition is to a. order goods from vendors b. record receipt of goods from vendors c. authorize the purchasing department to order goods d. bill for goods delivered ANS: C 2. The purpose of the receiving report is to d. bill for goods delivered ANS: B 3. All of the following departments have a copy of the purchase order except a. the purchasing department b. the receiving department c. accounts payable d. general ledger ANS: D 4. The purpose of the purchase order is to a. order goods from vendors b. record receipt of goods from vendors c. authorize the purchasing department to order goods d. approve payment for goods received ANS: A 5. The open purchase order file in the purchasing department is used to determine
a. the quality of items a vendor ships b. the best vendor for a specific item c. the orders that have not been received d. the quantity of items received ANS: C 6. The purchase order a. is the source document to make an entry into the accounting records b. indicates item description, quantity, and price c. is prepared by the inventory control department d. is approved by the end-user department ANS: B 7. The reason that a blind copy of the purchase order is sent to receiving is to a. inform receiving when a shipment is due b. force a count of the items delivered c. inform receiving of the type, quantity, and price of items to be delivered d. require that the goods delivered are inspected ANS: B 8. The receiving report is used to a. accompany physical inventories to the storeroom or warehouse b. advise the purchasing department of the dollar value of the goods delivered c. advise general ledger of the accounting entry to be made d. advise the vendor that the goods arrived safely
ANS: A 9. When a copy of the receiving report arrives in the purchasing department, it is used to d. recognize the purchase order as closed ANS: D 10. The financial value of a purchase is determined by reviewing the a. packing slip b. purchase requisition c. receiving report d. supplier’s invoice ANS: D 11. Which document is least important in determining the financial value of a purchase? a. purchase requisition b. purchase order c. receiving report d. supplier’s invoice ANS: A 12. In a merchandising firm, authorization for the payment of inventory is the responsibility of a. inventory control b. purchasing c. accounts payable d. cash disbursements ANS: C
13. In a merchandising firm, authorization for the purchase of inventory is the responsibility of a. inventory control b. purchasing c. accounts payable d. cash disbursements ANS: A 14. When purchasing inventory, which document usually triggers the recording of a liability? a. purchase requisition b. purchase order c. receiving report d. supplier’s invoice ANS: D 15. Because of time delays between receiving inventory and making the journal entry a. liabilities are usually understated b. liabilities are usually overstated c. liabilities are usually correctly stated d. none of the above ANS: A 16. Usually the open voucher payable file is organized by d. transaction date ANS: B 17. Which of the following statements is not correct?
a. the voucher system is used to improve control over cash disbursements b. the sum of the paid vouchers represents the voucher payable liability of the firm c. the voucher system permits the firm to consolidate payments of several invoices on one voucher d. many firms replace accounts payable with a voucher payable system ANS: B 18. In the expenditure cycle, general ledger does not a. post the journal voucher from the accounts payable department b. post the account summary from inventory control c. post the journal voucher from the purchasing department d. reconcile the inventory control account with the inventory subsidiary summary ANS: C 19. The documents in a voucher packet include all of the following except a. a check b. a purchase order c. a receiving report d. a supplier’s invoice ANS: A 20. To maintain a good credit rating and to optimize cash management, cash disbursements should arrive at the vendor’s place of business a. as soon as possible b. on the due date
c. on the discount date d. by the end of the month ANS: C 21. The cash disbursement clerk performs all of the following tasks except a. reviews the supporting documents for completeness and accuracy b. prepares checks c. signs checks d. marks the supporting documents paid ANS: C 22. When a cash disbursement in payment of an accounts payable is recorded a. the liability account is increased b. the income statement is changed c. the cash account is unchanged d. the liability account is decreased ANS: D
