It Has Been Discovered That Credit Sales Have Been Made

question 8

Multiple Choice

It has been discovered that credit sales have been made to customers with a poor credit rating.If this activity continues,the company may face uncollectible sales and losses due to bad debts.What applicable control procedure may help the company to gain control over this situation?

• A)separation of shipping and billing duties
• B)credit approval by a credit manager and not marketing personnel
• C)data entry application controls
• D)price lists

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Definitions:

Credit Card

A payment card issued to users as a method of payment allowing the cardholder to pay for goods and services based on the holder's promise to pay for them.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a specified period, indicating the efficiency of inventory management.

Accounts Receivable Turnover

A financial ratio indicating how quickly a company collects on outstanding accounts receivable, calculated by dividing total net sales by the average accounts receivable during a period.

Cash Cycle

The amount of time it takes for a company to convert its investments in inventory back into cash through sales.