It Is Frequently Possible to Test the Physical Inventory Prior

question 38

Multiple Choice

It is frequently possible to test the physical inventory prior to the balance sheet date when

• A) the perpetual inventory records are accurate and related controls operate effectively.
• B) year-end sales are small.
• C) the internal control system is no better at year-end than at an earlier point in time.
• D) the client counts inventory at interim dates.

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Definitions:

Cash Account

A cash account is a brokerage account that requires the investor to pay the full amount for securities purchased and to receive full delivery of the securities sold.

Two-Column Journal

A fundamental accounting record with two columns used for debits and credits to record financial transactions.

Debit

An accounting entry that increases an asset or expense account, or decreases a liability or equity account. It is positioned on the left side of an account ledger.

Credit

An accounting entry that increases the balance of liabilities and equity accounts or decreases the balance of an asset or expense account.