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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Which of the following statements concerning internal control procedures for merchandise sales is not correct?

a. A sale and its associated receivable are recorded only when the order, shipping, and billing documents are all present.

b. Shipping and billing documents are prepared based on the order document.

c. Accounting for a sale begins with the receipt of a purchase order or some similar document from a customer.

d. The order document is not necessary for the buyer to be obligated to accept and pay for the ordered goods.

To determine

Internal Control procedures:

The internal control procedures are the one which is necessary for controlling the sales transaction and it helps in detecting the defects or mistakes in the recording of the sales.

The correct statement for internal control procedure for merchandise sales.

Explanation

The procedure of internal control procedures plays a vital role in checking the sales transactions and detecting the defects in the transactions recorded. The procedure consists of following:

  1. The sales are recorded only at the time of presence of all documents i.e. order documents, shipping documents, and billing documents.
  2. The preparation of shipping and billing documents should be on the basis of the order documents...

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