ACBS 400B EXAM 2 COMPREHENSIVE
QUESTIONS AND CORRECT ANSWERS
◉ What are and organization's trading partners called?
Answer: Vendors or Suppliers
◉ What is an organizations goal?
Answer: To minimize costs
◉ What are the overall control activities for the expenditure cycle?
Answer: minimize the risk
1) misappropriation of assets (e.g., cash, inventory)
2) financial statement fraud (e.g., understating expenses and
liabilities)
◉ What are the 5 functions of the expenditure cycle?
Answer: 1. Requisitioning
2. Purchasing
3. Receiving
4. Accounts payable
5. Cash disbursements
,◉ What is the objective of the requisitioning function within the
expenditure cycle?
Answer: an internal function that initiates the purchasing process
and ensure that needed goods are requested, given available
resources
◉ What is the main control of the requisition function?
Answer: A request for approval.
Large organizations will formalize this function with a source
document, whereas a smaller business may require the company
owner permission.
◉ What is the objective of the purchasing function within the
expenditure cycle?
Answer: Purchasing is initiated within the organization with the
trading partner to ensure that needed goods are ordered and
received on a timely basis
◉ What is the main control of the purchasing function?
Answer: A purchasing agent is responsible for keeping track of the
purchasing activities and justifying the cost. Authorization to
purchase goods and services is done at this point.
,◉ What is the objective of the receiving function within the
expenditure cycle?
Answer: A subsystem within the expenditure cycle where goods
should receive only what the organization ordered and ensure it is of
good quality.
◉ What is the main control of the receiving function?
Answer: competent and trustworthy people must receive the goods
(i.e., take custody of the goods) in a reasonably secure area.
◉ True/False: Once the goods are received, the organization has an
obligation to pay for those goods
Answer: True
◉ When should the custody of inventory and the inventory records
should be updated?
Answer: Receiving Function
◉ What is the objective of the A/P function within the expenditure
cycle?
Answer: to keep track of who to pay, when to pay, and approving
how much to pay your vendors
◉ What is the most important function of the expenditure cycle?
, Answer: Accounts Payable. Maintains a company's cash flow and
credit rating
◉ What is the main control of the A/P function?
Answer: 1. must make sure that the expenses from the vendor
invoices are properly posted in the correct period.
2. the invoice is processed by matching the vendor invoice to either a
copy of the purchase order or a copy of the receiving report
◉ What is the objective of the Cash Disbursements function within
the expenditure cycle?
Answer: To pay the supplier the correct amount at the proper time
◉ What is the main control of the A/P function?
Answer: Once the accounting department approves the invoice for
payment, payment to the vendor is processed (e.g., check written)
and signed by the treasurer's office.
◉ True or False: Delaying payments to a vendor can have a negative
impact on an organization's credit
Answer: True
◉ What are Source Documents?
QUESTIONS AND CORRECT ANSWERS
◉ What are and organization's trading partners called?
Answer: Vendors or Suppliers
◉ What is an organizations goal?
Answer: To minimize costs
◉ What are the overall control activities for the expenditure cycle?
Answer: minimize the risk
1) misappropriation of assets (e.g., cash, inventory)
2) financial statement fraud (e.g., understating expenses and
liabilities)
◉ What are the 5 functions of the expenditure cycle?
Answer: 1. Requisitioning
2. Purchasing
3. Receiving
4. Accounts payable
5. Cash disbursements
,◉ What is the objective of the requisitioning function within the
expenditure cycle?
Answer: an internal function that initiates the purchasing process
and ensure that needed goods are requested, given available
resources
◉ What is the main control of the requisition function?
Answer: A request for approval.
Large organizations will formalize this function with a source
document, whereas a smaller business may require the company
owner permission.
◉ What is the objective of the purchasing function within the
expenditure cycle?
Answer: Purchasing is initiated within the organization with the
trading partner to ensure that needed goods are ordered and
received on a timely basis
◉ What is the main control of the purchasing function?
Answer: A purchasing agent is responsible for keeping track of the
purchasing activities and justifying the cost. Authorization to
purchase goods and services is done at this point.
,◉ What is the objective of the receiving function within the
expenditure cycle?
Answer: A subsystem within the expenditure cycle where goods
should receive only what the organization ordered and ensure it is of
good quality.
◉ What is the main control of the receiving function?
Answer: competent and trustworthy people must receive the goods
(i.e., take custody of the goods) in a reasonably secure area.
◉ True/False: Once the goods are received, the organization has an
obligation to pay for those goods
Answer: True
◉ When should the custody of inventory and the inventory records
should be updated?
Answer: Receiving Function
◉ What is the objective of the A/P function within the expenditure
cycle?
Answer: to keep track of who to pay, when to pay, and approving
how much to pay your vendors
◉ What is the most important function of the expenditure cycle?
, Answer: Accounts Payable. Maintains a company's cash flow and
credit rating
◉ What is the main control of the A/P function?
Answer: 1. must make sure that the expenses from the vendor
invoices are properly posted in the correct period.
2. the invoice is processed by matching the vendor invoice to either a
copy of the purchase order or a copy of the receiving report
◉ What is the objective of the Cash Disbursements function within
the expenditure cycle?
Answer: To pay the supplier the correct amount at the proper time
◉ What is the main control of the A/P function?
Answer: Once the accounting department approves the invoice for
payment, payment to the vendor is processed (e.g., check written)
and signed by the treasurer's office.
◉ True or False: Delaying payments to a vendor can have a negative
impact on an organization's credit
Answer: True
◉ What are Source Documents?
