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Chapter 5e ch05 Hall
CHAPTER 5E CH05 HALL
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 invoice.
12.
13.
14.
15.
16.
17.
18.
19.
20. ANS: F Authorization for a
cash disbursement occurs in the
cash disbursement department
upon receipt of the supplier’s
invoice. ANS: F An automated
cash disbursements system can
yield better cash management
since payments are made on
time. ANS: T Permitting
warehouse
staff to maintain the only
inventory records violates
separation of duties. ANS: T A
purchasing
system that employs electronic
data interchange does not use a
purchase order. ANS: F
Inventory
control should be located in the
warehouse. ANS: F Inspection
of shipments in the receiving
department would be improved
if the documentation showed
the value of the inventory.
ANS: F
One reason for authorizing
purchases is to enable efficient
inventory management. ANS: T
If
accounts payable receives an
invoice directly from the
supplier it needs to be
reconciled with the
purchase order and receiving
report. ANS: T 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
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Chapter 5 hall
TEXT OF CHAPTER 5E CH05 HALL
Chapter 5The Expenditure Cycle Part I: Purchases and Cash Disbursements ProceduresTRUE/FALSE1.
Purchasing decisions are authorized by inventory control.ANS: T2. The blind copy of the purchase order that
goes to the receiving department contains no itemdescriptions.ANS: F3. Firms that wish to improve control
over cash disbursements use a voucher system.ANS: T4. In a voucher system, the sum of all unpaid vouchers
in the voucher register equals the firms totalvoucher payable balance.ANS: T5. The accounts payable
department reconciles the accounts payable subsidiary ledger to the controlaccount.ANS: F6. The use of
inventory reorder points suggests the need to obtain specific authorization.ANS: F7. Proper segregation of
duties requires that the responsibility approving a payment be separated fromposting to the cash disbursements
journal.ANS: T8. A major risk exposure in the expenditure cycle is that accounts payable may be overstated at
the end ofthe accounting year.ANS: F9. When a trading partner agreement is in place, the traditional three way
match may be eliminated.ANS: T10. Authorization of purchases in a merchandising firm occurs in the
inventory control department.ANS: T11. A three way match involves a purchase order, a purchase requisition,
and an invoice.12.13.14.15.16.17.18.19.20. ANS: F Authorization for a cash disbursement occurs in the cash
disbursement department upon receipt of the suppliers invoice. ANS: F An automated cash disbursements
system can yield better cash management since payments are made on time. ANS: T Permitting warehouse
staff to maintain the only inventory records violates separation of duties. ANS: T A purchasing system that
employs electronic data interchange does not use a purchase order. ANS: F Inventory control should be located
in the warehouse. ANS: F Inspection of shipments in the receiving department would be improved if the
documentation showed the value of the inventory. ANS: F One reason for authorizing purchases is to enable
efficient inventory management. ANS: T If accounts payable receives an invoice directly from the supplier it
needs to be reconciled with the purchase order and receiving report. ANS: T Supervision in receiving is
intended to reduce the theft of assets.ANS: TMULTIPLE CHOICE1. The purpose of the purchase requisition
is toa. order goods from vendorsb. record receipt of goods from vendorsc. authorize the purchasing department
to order goodsd. bill for goods deliveredANS: C 2. The purpose of the receiving report is tod. bill for goods
deliveredANS: B 3. All of the following departments have a copy of the purchase order excepta. the
purchasing departmentb. the receiving departmentc. accounts payabled. general ledgerANS: D 4. The purpose
of the purchase order is toa. order goods from vendorsb. record receipt of goods from vendorsc. authorize the
purchasing department to order goodsd. approve payment for goods receivedANS: A 5. The open purchase
order file in the purchasing department is used to determinea. the quality of items a vendor shipsb. the best
vendor for a specific itemc. the orders that have not been receivedd. the quantity of items receivedANS: C 6.
The purchase ordera. is the source document to make an entry into the accounting recordsb. indicates item
description, quantity, and pricec. is prepared by the inventory control departmentd. is approved by the end-user
departmentANS: B 7. The reason that a blind copy of the purchase order is sent to receiving is toa. inform
receiving when a shipment is dueb. force a count of the items deliveredc. inform receiving of the type,
quantity, and price of items to be deliveredd. require that the goods delivered are inspectedANS: B 8. The
receiving report is used toa. accompany physical inventories to the storeroom or warehouseb. advise the
purchasing department of the dollar value of the goods deliveredc. advise general ledger of the accounting
entry to be maded. advise the vendor that the goods arrived safelyANS: A 9. When a copy of the receiving
report arrives in the purchasing department, it is used tod. recognize the purchase order as closedANS: D10.
The financial value of a purchase is determined by reviewing thea. packing slipb. purchase requisitionc.
receiving reportd. suppliers invoiceANS: D11. Which document is least important in determining the financial
value of a purchase?a. purchase requisitionb. purchase orderc. receiving reportd. suppliers invoiceANS: A12.
In a merchandising firm, authorization for the payment of inventory is the responsibility ofa. inventory
controlb. purchasingc. accounts payabled. cash disbursementsANS: C13. In a merchandising firm,
authorization for the purchase of inventory is the responsibility ofa. inventory controlb. purchasingc. accounts
payabled. cash disbursementsANS: A14. When purchasing inventory, which document usually triggers the
recording of a liability?a. purchase requisitionb. purchase orderc. receiving reportd. suppliers invoiceANS:
D15. Because of time delays between receiving inventory and making the journal entrya. liabilities are usually
understatedb. liabilities are usually overstatedc. liabilities are usually correctly statedd. none of the aboveANS:
A16. Usually the open voucher payable file is organized byd. transaction dateANS: B17. Which of the
following statements is not correct?a. the voucher system is used to improve control over cash disbursementsb.
the sum of the paid vouchers represents the voucher payable liability of the firmc. the voucher system permits
the firm to consolidate payments of several invoices on onevoucherd. many firms replace accounts payable
with a voucher payable systemANS: B18. In the expenditure cycle, general ledger does nota. post the journal
voucher from the accounts payable departmentb. post the account summary from inventory controlc. post the
journal voucher from the purchasing departmentd. reconcile the inventory control account with the inventory
subsidiary summaryANS: C19. The documents in a voucher packet include all of the following excepta. a
checkb. a purchase orderc. a receiving reportd. a suppliers invoiceANS: A20. To maintain a good credit rating
and to optimize cash management, cash disbursements should arriveat the vendors place of businessa. as soon
as possibleb. on the due datec. on the discount dated. by the end of the monthANS: C21. The cash
disbursement clerk performs all of the following tasks excepta. reviews the supporting documents for
completeness and accuracyb. prepares checksc. signs checksd. marks the supporting documents paidANS:
C22. When a cash disbursement in payment of an accounts payable is recordeda. the liability account is
increasedb. the income statement is changedc. the cash account is unchangedd. the liability account is
decreasedANS: D
