All of the Following Are Important Controls Over Credit Memos

question 38

Multiple Choice

All of the following are important controls over credit memos except:

• A) Proper segregation of duties to ensure that sales discounts taken were earned.
• B) Credit memos should be approved by someone other than whoever initiated it.
• C) Credit memos should be supported by a receiving document for returned goods.
• D) Proper segregation of duties between access to customer records and authorizing credit memos.

---

Definitions:

Proportion

A part of a whole expressed as a fraction or percentage, often used to compare quantities in terms of size or magnitude.

Quick Ratio

A liquidity measure that indicates a company's ability to cover its short-term liabilities with its most liquid assets.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Liquidity

A firm’s cash and marketable securities position, refers to its ability to meet maturing obligations. A liquid asset is any asset that can be quickly sold and converted to cash at its “fair” value. Active markets provide liquidity.