The Following Set of Items Describes Activities Completed by a Company

question 181

Multiple Choice

The following set of items describes activities completed by a company in purchasing and paying for merchandise and in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. (Choices may be used more than once.)
-All supporting documents attached to an invoice are canceled when the check is signed.

• A)Adheres to sound internal controls
• B)Violates sound internal controls
• C)Neither strengthens nor violates internal control

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Definitions:

Noncash Assets

Assets that cannot be easily converted into cash, such as equipment, real estate, and intellectual property.

Capital Balances

The sum of funds invested by owners in a business along with any accumulated profits or losses.

Loss On Realization

Loss on realization occurs when the proceeds from the sale of an asset are less than its carrying amount on the books, leading to a financial loss.

Deficit

The amount by which expenditures exceed income or costs outstrip revenues, resulting in a negative balance.