Smith Manufacturing Company's Accounts Receivable Clerk Has a Friend Who

question 90

Multiple Choice

Smith Manufacturing Company's accounts receivable clerk has a friend who is also a customer of Smith Manufacturing. The accounts receivable clerk has issued fictitious credit memos to his friend for goods supposedly returned. The most effective procedure for preventing this activity is to

• A) prenumber and account for all credit memorandums.
• B) require receiving reports that provide evidence of returned inventory items to support all credit memorandums before they are approved.
• C) have independent sales and accounts receivable departments.
• D) mail monthly statements to customers.

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Definitions:

Excise Tax

A tax imposed on specific goods, services, or activities, often with the aim of reducing consumption of those items or generating revenue.

Tax Revenue

The income that is gained by governments through taxation, used to fund public services and government operations.

Leather Shoes

Footwear made from the hide of animals, treated and fashioned into various styles and forms for practical and fashion purposes.

Downward-Sloping

Describes a line or curve that moves from the upper left to the lower right, often used to illustrate a decrease in price leading to an increase in demand.