What is the normal procedure for new customers or customers making a purchase th
ID: 2386918 • Letter: W
Question
What is the normal procedure for new customers or customers making a purchase that causes their credit limit to be exceeded? (Points : 2)routine approval is granted without authorization
specific approval must be granted by the credit manager
reject the sale in either case without question
check the credit bureau for a credit rating on the customer
2. (TCO 4) A company uses an invoice method whereby customers typically pay according to each invoice. This is the __________ method. (Points : 2)
monthly statement
open-invoice
balance forward
cycle billing
3. (TCO 4) Sad Clown Pajamas is an Internet-based wholesaler. Customers enter their orders online. The manager of Callow Youth Clothing was entering and order when the following error message popped up: Please enter your email address. This message is the result of a (Points : 2)
validity check.
reasonableness test.
limit check.
completeness test.
4. (TCO 4) Which control would be best to prevent payments made to fictitious vendors? (Points : 2)
allow payments only to approved vendors
restrict access to any payment or approval documents
have an independent bank reconciliation
make sure all documents are in order before approving payments
5. (TCO 4) The receiving clerk at Folding Squid Technologies examines incoming shipments and checks their purchase order numbers. A receiving report is then sent to accounts payable, where it is reconciled with the relevant purchase orders and invoices and payment is authorized. Which of the following would correct control weaknesses, if any, related to these activities? (Points : 2)
Vendor invoices should be approved for payment by the shipping clerk after the purchase order and receiving report are reconciled.
Vendor invoices should be approved for payment by the purchasing manager.
Purchase orders and receiving reports should be reconciled by the purchasing manager.
Controls are adequate under the current system.
6. (TCO 4) How does a company avoid overbilling customers for items not yet shipped? (Points : 5)
7. (TCO 4) Name and describe the two common systems for approving vendor payments. (Points : 5)
Explanation / Answer
1. Specific approval must be granted by the credit manager.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Credit manager will ensure that whether the particular purchase should be allowed or not. He will check for the appropriateness of the purchase transaction and accordingly manage the purchase.
2. Open-invoice method.
Open invoice shows the amount that a business owes to other company against its purchases.
3. Validity check.
Validity check is used to find out errors in a particular transaction or data. It ensures that the given data adheres to a standard.
4. Allow payments only to approved vendors.
It will ensure that no payment will be made to the fictitious vendors. Suitable vendors are verified initially and then payment is made.
5. Vendor invoices should be approved for payment by the purchasing manager.
Purchasing manager should analyze each and every invoice carefully in order to check their legality. Accordingly, the invoices should be approved for payment.
6. A company can avoid overbilling customers for items not yet shipped by applying following controls:
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