Assessed Control Risk and Results of Substantive Tests of Transactions

question 65

Multiple Choice

Assessed control risk and results of substantive tests of transactions are normally unimportant for designing tests of details of balances for which of the following accounts?

• A)Accounts receivable
• B)Inventory
• C)Accounts payable
• D)Notes payable

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Definitions:

NSF Check

A check that has not been honored by the bank due to insufficient funds in the account to cover the amount.

Outstanding Checks

Checks that have been written and recorded in a company’s ledger but have not yet been cleared or deducted from the bank account balance.

Credit Memo

A document issued by a seller to a buyer, reducing the amount owed by the buyer under certain circumstances, such as returned goods or an overcharge.

Debit Memo

A document issued by a seller of goods or services to a buyer, reducing the amount the buyer owes under the original invoice.