Francesco Panaccione

Professor Lori Hofer

ACC 340
Hall Chapter 4
Review Question 1
The customer order or sales order initiates the sales process. It is a document generated by a
customer to request goods or services from a seller. In some cases, a quotation or inquiry precedes
this order, but the sales order formally starts the sales cycle.
Review Question 2
Packing Slip: A document that lists the items being shipped and accompanies the goods. It usually
does not include prices but provides details like item description, quantity, and any special
instructions.
Shipping Notice: A document that notifies the customer that their order has been shipped. It
includes details like the shipping method, expected delivery date, and tracking information.
Bill of Lading: A legal document issued by the carrier to acknowledge receipt of the goods for
shipment. It acts as a contract between the shipper and the carrier, outlining terms of transport and
serves as a receipt when the goods are delivered.
Review Question 3
In the revenue cycle, the receiving department verifies, and processes returns from customers.
When customers return products, the receiving department inspects the items, compares them to the
return authorization, and ensures they match the sales order or return request. This step helps
maintain inventory accuracy and informs the billing department to adjust the customer’s account.
Review Question 4
The general ledger clerk receives summary data from various departments, primarily in the form of
journal vouchers, summaries, and reports. These include:
• Sales Department: Sales summaries, including total sales transactions and revenue data.
• Billing Department: Invoices and billing summaries reflecting total amounts billed to
customers.
• Inventory Department: Inventory adjustments and cost of goods sold (COGS) summaries.
• Accounts Receivable Department: Receipts and adjustments reflecting payments received
from customers.
• Accounts Payable Department: Summaries of payments made to vendors and other
liabilities.
• Cash Receipts and Cash Disbursements Departments: Summaries of cash inflows and
outflows for the period.
Review Question 5
General Authorization: Policies and procedures that allow employees to perform certain tasks
without seeking specific approval each time, such as approving routine purchases within a set dollar
limit or performing regular inventory checks.
Specific Authorization: When higher-level management approval is required for certain actions,
usually for transactions that exceed established thresholds or are unusual, such as authorizing a
large credit sale or high-value purchase.
Segregation of Duties: Dividing tasks among employees to prevent any one individual from having
control over all aspects of a transaction. For example, one employee handles cash receipts, while
another records the transaction, and a third reconciles the accounts. This reduces the risk of fraud or
errors.
Review Question 7
Independent verification controls are essential at multiple points in the revenue cycle to ensure
accuracy, compliance, and prevent fraud. Key points include:
• Sales Order Processing: Verification occurs when the sales department checks that
customer orders are valid (e.g., credit checks, pricing accuracy, inventory availability).
• Shipping: The shipping department should independently verify the items being shipped by
comparing the physical goods to the sales order and packing slip to ensure accuracy in
quantity and type.
• Billing: Independent verification is needed when the billing department generates invoices,
ensuring that the billed amounts match the sales order and shipping information.
• Accounts Receivable: Verification when posting payments from customers to ensure the
amounts received match the invoices and sales records.
• General Ledger: Independent verification ensures that the summary data posted from
various departments (sales, shipping, billing, accounts receivable) accurately reflects the
financial transactions and is properly recorded.
Review Question 8
Automation refers to the use of technology, such as software and machines, to perform tasks with
minimal human intervention. In business processes, automation is used to streamline operations,
reduce manual labor, increase efficiency, and eliminate human error.
Why is automation used?
• Efficiency: Automation speeds up repetitive and time-consuming tasks, allowing employees
to focus on more complex activities.
• Accuracy: Automated systems reduce the likelihood of errors in data entry, processing, and
reporting.
• Cost Reduction: By reducing the need for manual labor, businesses save time and costs
associated with routine tasks.
• Consistency: Automated processes ensure that tasks are performed uniformly, improving
overall process quality and reliability.
 • Scalability: Automation makes it easier to scale operations without a proportional increase
in labor costs or effort.
Discuss Question 1
Firms separate warehousing, shipping, and inventory control to ensure checks and balances,
improve specialization, and maintain accountability. This reduces errors and fraud by enabling
independent verification of processes. While it might seem like it increases paperwork, it enhances
control and accuracy, and modern automation can reduce the administrative burden. Ultimately, this
structure helps prevent costly mistakes and improves operational efficiency.
Discuss Question 3
The purpose of having mail room procedures is to ensure the secure, accurate, and efficient
handling of incoming and outgoing mail, especially for payments and important business
documents. Key reasons include:
1. Security: Proper mail procedures prevent theft, loss, or tampering with sensitive documents,
such as customer payments (checks) or confidential information.
2. Accurate Record-Keeping: Procedures ensure that all received payments and documents
are logged, tracked, and routed to the correct departments (e.g., accounting, sales) for
processing.
3. Segregation of Duties: Mailroom staff typically open and sort mail, but they do not process
payments or handle accounting. This separation reduces the risk of fraud by ensuring that no
single person handles all aspects of cash receipts or document processing.
4. Efficiency: Organized mailroom procedures speed up the distribution of mail and payments,
ensuring that customer orders, invoices, and payments are processed in a timely manner.
5. Compliance: Formal procedures help the company comply with internal controls, legal, and
audit requirements by maintaining a clear chain of custody for important documents and
payments.
In short, mail room procedures safeguard company assets, enhance internal controls, and ensure that
business operations run smoothly.
Multiple Choice
1. bill of lading
2. stock release
3. send the stock release document and the shipping notice to the billing department as proof of
shipment
4. when a valid customer places a materially large order
5. supervision
6. The use of prenumbered sales orders
7. inventory control
8. the AR clerk authorizes the write off bad debts
9. shipping clerk
10. opening the mail and recording cash receipts in the journal