REVENUE CYCLE

MULTIPLE CHOICE
1. The credit manager reports to the __________ and the treasurer reports to the
__________.
a) controller; vice president of finance
b) treasurer; controller
c) marketing manager; vice president of finance
d) treasurer; vice president of finance

2. The revenue cycle is a recurring set of business activities and related information
processing operations associated with providing goods and services to customers and
collecting cash in payment for those sales. With whom is the primary external exchange
of information?
a) competitors b) creditors c) customers d) marketing organizations

3. What is the primary objective of the revenue cycle?

a) to maximize revenue and minimize expense
b) to reduce outstanding accounts receivable balances through increased cash sales
c) to provide the right product in the right place at the right time at the right price
d) to sell as much product as possible and/or to maximize service billings

4. To accomplish the objectives set forth in the revenue cycle, a number of key
management decisions must be addressed. Which of the decisions below is not ordinarily
found as part of the revenue cycle?
a) What credit terms should be offered?
b) How often should accounts receivable be subjected to audit?
c) How can customer payments be processed to maximize cash flows?
d) What are the optimal prices for each product or service?

5. Which of the activities listed below is not part of the revenue cycle?
a) sales order entry b) shipping c) receiving d) billing

6. In addition to the sales order entry process there are three other processes in the
revenue cycle. Which of the following is not one of them?
a) shipping b) billing c) general ledger d) cash collections

7. One way to improve sales order entry efficiency is by allowing customers to enter sales
order data themselves. This can be accomplished for both in-store, mail order, and Web
site sales. Such interactive sales order entry systems are referred to as
a) bulletin boards. b) smorgasbords. c) catalogue boards. d) choice boards.

8. The __________ is a legal contract that defines responsibility for the goods that are in
transit.
a) bill of lading b) freight bill c) sales order d) order acknowledgement

9. Matching customer accounts and inventory item numbers to the information in the
customer and inventory master files is an example of a
a) completeness test b) field check c) reasonableness test d) validity check

10. During the sales order entry process, a __________ is performed to compare the
quantity ordered with the standard amounts normally ordered.
a) completeness test b) redundant data check c) field check d) reasonableness test

11. During the sales order entry process, a __________ is performed to verify that each
transaction record contains all appropriate data items.
a) completeness test b) redundant data check c) field check d) reasonableness test

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12. A number of edit checks should be performed to ensure that all of the data required to
process an order have been collected and accurately recorded. The edit check that
compares a quantity being ordered to past history for that item and customer is called
a) a validity check. b) a reasonableness test. c) a completeness test. d) a limit check.

13. In the revenue cycle, a customer places an order for a certain product. Before the
order is checked for inventory availability, what step should be taken?
a) The customer's credit should be checked for a sale on account.
b) The sales order should be created and written to a file.
c) Shipping should be notified of an order in process.
d) A picking list should be generated for the warehouse.

14. How is credit approval generally handled for well-established customers with a
documented payment history?
a) specific authorization by the credit manager
b) routine approval is usually granted
c) a new credit application is taken
d) a formal credit check is made for each sale

15. The maximum allowable account balance for a given customer is called the
a) credit checkpoint. b) credit limit. c) reorder point. d) backorder point.

16. What is the normal procedure for new customers or customers making a purchase that
causes their credit limit to be exceeded?
a) routine approval is granted without authorization
b) specific approval must be granted by the credit manager
c) reject the sale in either case without question
d) check the credit bureau for a credit rating on the customer

17. Why should inventory quantities on hand be checked before a sale is actually made?
a) to inform the customer about availability and delivery times
b) to know which items must be back ordered
c) to inform inventory control of mistakes in the inventory records
d) A and B above

18. When an inventory item that is not in stock has been ordered by a customer, a back
order is sent to the
a) production department. b) purchasing department.
c) billing department. d) A and B above

19. Customer inquiries during the sales order process are best handled by
a) a sales order and customer service person. b) accounting personnel.
c) the credit manager. d) A and C above

20. In a shipping department, a __________ is a legal contract that defines responsibility

for goods that are in transit.
a) packing slip b) bill of lading c) picking list d) back order

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ANSWER KEY
1) D
2) C
3) C
4) B
5) C
6) C
7) D
8) A
9) D
10) D
11) A
12) B
13) A
14) B
15) B
16) B
17) D
18) A
19) A
20) B