Purchase Cutoff Activities Should Be Designed to Test That Merchandise

question 56

Multiple Choice

Purchase cutoff activities should be designed to test that merchandise is included in the inventory of the entity company if the company:

• A)has paid for the merchandise.
• B)has physical possession of the merchandise.
• C)holds legal title to the merchandise.
• D)holds the shipping documents for the merchandise issued in the company's name.

---

Definitions:

Unadjusted Trial Balance

A list of all the balances in a company’s accounts before any adjusting entries are made for reporting purposes.

Management Report

A document that provides managers with information necessary to make decisions, including financial and operational data.

Accounting Period

A specific time span for which financial statements are prepared, commonly a quarter or a year.

Dividends Account

An account used in bookkeeping to track dividends declared by a company to be paid out to its shareholders.