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Chapter 5The 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 firms
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 suppliers 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. suppliers 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. suppliers 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. suppliers 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 suppliers invoice
ANS: A
20. To maintain a good credit rating and to optimize cash management, cash disbursements
should arrive
at the vendors 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