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Discussion Questions

The document discusses questions about internal controls and procedures for various departments within a company's supply chain and accounting systems. It explains that separate departments for warehousing, shipping, and inventory control create proper environments for each task and do not create excessive paperwork. It also distinguishes the roles of sales, billing, and accounts receivable departments, and explains why sales and accounts receivable cannot prepare bills. Procedures for mail rooms and journal vouchers are described. Potential issues that could arise from a lack of segregation of duties or authorization controls are provided as an example of how an employee could embezzle funds.

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Azelie Judd
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1K views3 pages

Discussion Questions

The document discusses questions about internal controls and procedures for various departments within a company's supply chain and accounting systems. It explains that separate departments for warehousing, shipping, and inventory control create proper environments for each task and do not create excessive paperwork. It also distinguishes the roles of sales, billing, and accounts receivable departments, and explains why sales and accounts receivable cannot prepare bills. Procedures for mail rooms and journal vouchers are described. Potential issues that could arise from a lack of segregation of duties or authorization controls are provided as an example of how an employee could embezzle funds.

Uploaded by

Azelie Judd
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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DISCUSSION QUESTIONS

1. Why do firms have separate departments for warehousing and shipping? What about
warehousing and inventory control? Doesn't this just create more paperwork?
- The warehouse department is mainly there to offer proper surrounding with the
purpose of stocking up merchandises which need safety from other elements while the
shipping department is surrounding by the activities of an inventory and is focused on the
transactions of the inventories which are incoming and outgoing. The inventory control
manages the inventory records including the increase and decrease of inventory. This
department is also responsible for placing purchase orders on the basis of quantity
required and available. No, it doesn't create more paperwork since it isn't required when
letting the supply chain process continuous.
2. Distinguish between the sales order, billing, and AR departments. Why can't the sales
order or AR departments prepare the bills?
- Sales order procedures contain a thorough systematic procedure for the sale of
goods in which, receipt of order, billing, shipping, warehousing updating accounts
receivable ledgers and inventory ledgers are treated as separate tasks. Sales order
includes receipt of order from customers and recording the order in a standardized
manner. Billing department prepares the bills after the getting the information that
shipment are received, this is inclusive of freight charges and taxes. It is also the
responsibility of the billing department to match the shipment details with the customer
order to verify that the requirements are matched. After goods are shipped and billed, AR
department records amount due from the customer.
3. Explain the purpose of having mail room procedures.
- Mail room procedure in relation with cash receipts involves proper recording of
cash and checks received from accounts receivables which are sent through mails. This
procedure helps in reduction of errors and frauds in relation with payment received.
4. In a manual accounting system, what advantage does the journal voucher system have
over the traditional general journal system?
- Journal voucher system has the advantage of increased efficiency and time
management when compared with the traditional general journal system. Computers may
more rapidly perform accounting functions or assessments than manual accounting
systems, once data has been entered into the system.
5. How could an employee embezzle funds by issuing an unauthorized sales credit memo
if the appropriate segregation of duties and authorization controls were not in place?
- An employee can embezzle funds by issuing an unauthorized sales credit memo
if the appropriate segregation of duties and authorization controls were not in place where
the employee can generate debt under someone else’s name. The employee could also
buy and return items as this false person and intercept the checks.

Azelie Judd N. Estillore


MULTIPLE-CHOICE QUESTIONS
1. Which document is NOT prepared by the sales department?
a. packing slip
b. shipping notice
c. bill of lading
d. stock release

2. Which document triggers the update of the inventory subsidiary ledger?


a. bill of lading
b. stock release
c. sales order
d. shipping notice

3. Which function should be the billing department NOT perform?


a. record the sales in the sales journal
b. sent the ledger copy of the sales order to accounts receivable
c. send the stock release document and the shipping notice to the billing
department as proof of shipment
d. send the stock release document to inventory control

4. When will a credit check approval most likely require specific authorization by the credit
department?
a. when verifying that the current transaction does not exceed the customer's credit limit
b. when verifying that the current transaction is with a valid customer
c. when a valid customer places a materially large order
d. when a valid customer returns goods

5. Which type of control is considered a compensating control?


a. segregation of duties
b. access control
c. supervision
d. accounting records

6. Which of the following is NOT an independent verification control?


a. The shipping department verifies goods sent from the warehouse are correct in type
and quantity.
b. General ledger clerks reconcile journal vouchers that were independently prepared in
various departments.
c. The use of prenumbered sales orders.
d. The billing department reconciles the shipping notice with the sales invoice to ensure
that customers are billed for only the quantities shipped.

7. Which function or department below records the decrease in inventory due to a sale?
a. warehouse
b. sales department

Azelie Judd N. Estillore


c. billing department
d. inventory control

8. Which situations indicates a weak internal control structure?


a. the AR clerk authorizes the write off of bad debts
b. the record-keeping clerk maintains both AR and AP subsidiary ledgers
c. the inventory control clerk authorizes inventory purchases
d. the AR clerk prepares customer statements every month

9. The bill of lading is prepared by the


a. sales clerk.
b. warehouse clerk.
c. shipping clerk.
d. billing clerk.

10. Which of the following functions should be segregated?


a. opening the mail and recording cash receipts in the journal
b. authorizing credit and determining reorder quantities
c. shipping goods and preparing the bill of lading
d. providing the information on inventory levels and reconciling the bank statement

Azelie Judd N. Estillore

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