Within the Context of the Financing Process, Separation of Duties

question 59

Multiple Choice

Within the context of the financing process, separation of duties means:

• A)The accounting department cannot issue dividend checks without the approval of the board of directors.
• B)An accountant who prepares dividend checks cannot also prepare checks for repayment of long-term debt.
• C)Both the accounting department cannot issue dividend checks without the approval of the board of directors and an accountant who prepares dividend checks cannot also prepare checks for repayment of long-term debt are true.
• D)Neither the accounting department cannot issue dividend checks without the approval of the board of directors nor an accountant who prepares dividend checks cannot also prepare checks for repayment of long-term debt is true.

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Definitions:

Accrued Sales Revenue

Revenue that has been earned but not yet received in cash or recorded by the accounting department.

Adjusting Entries

Financial records entered at the termination of an accounting period, aimed at allocating profits and outlays to the correct period.

Pretax Income

The income earned by a company before deducting taxes, representing the company's profitability after all expenses except taxes.

Accrued Expenses

Liabilities (payables) created when expenses are incurred, but cash will be paid in the future; created at end of period during the adjustment process to reflect the amount of expense incurred that the company will pay in the future.