Why Is a Good System of Internal Controls Necessary Over

question 18

Multiple Choice

Why is a good system of internal controls necessary over inventory?

• A)Inventory is an asset that a company must have available to sell.
• B)Inventory is large and hard for a company to manage with proper controls.
• C)Inventory is one of the main targets of fraud and theft.
• D)Inventory is tied to liabilities and must be managed before too much debt is incurred.

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Definitions:

Bond Issuance

The process through which an issuer creates a financial obligation (bond) that must be repaid to investors at a later date.

Straight-Line Amortization

A method of allocating the cost of an intangible asset evenly over its useful life.

Fiscal Year

A fiscal year is a 12-month period used for accounting purposes and preparing financial statements, differing from a calendar year.

Bonds Payable

A liability account in a company's balance sheet representing the amount it owes on issued bonds that have not yet been repaid.