Chapter 11The Billing/Accounts Receivable/ Cash Receipts (B/AR/CR) Process

TRUE/FALSE
1. The B/AR/CR process completes the order to cash process by accomplishing the activities of billing customers, managing customer accounts,
and securing payment for goods and services.ANS: T
2. Recording billing/accounts receivable/cash receipts event data is generally the responsibility of the treasury department, which typically reports to
the controller function.ANS: F
3. In the organization structure shown in the text, although both report to the VP of Finance, the treasurer and controller functions should be
segregated.. ANS: T
4. There sales department should be responsible for credit approval so sales personnel can immediately increase sales volume .ANS: F
5. The objective of cash management is to free up funds so that they can either be invested to earn interest, or used to reduced debt, thus reducing
interest charges.ANS: T
6. Float, when applied to cash receipts, is the time between customer payment and the availability of funds on deposit and available .ANS: T
7. Funds on deposit and available are known as good funds. ANS: T
8. The AR master file address is a postal address, maintained by the firms bank, which is used solely for the purpose of collecting checks .ANS: F
9. With electronic cash, a financial institution issues cash to an individual, which is placed into an electronic wallet. ANS: T
10. Database systems are Internet based systems for sending bills/invoices to customers and receiving the customer payment electronically. ANS:
F
11. An invoice is a business document used by a vendor to notify the customer of an obligation to pay the seller for merchandise which was ordered
and shipped. ANS: T
12. A purchasing statement is a business document designed to inform the payee of the invoices or other items covered by the check amount .ANS:
F
13. The accounts receivable master file is a repository of all unpaid invoices issued by an organization and awaiting final disposition. ANS: T
14. The logical data dictionary definition of the sales event data file would comprise one or more invoice records. ANS: T
15. Accepted sales requests are later processed through a separate exception routine. ANS: F
16. The three types of accounts receivable systems discussed in the text are the lockbox, balance forward, and open item systems. ANS: F
17. In a balance forward accounts receivable system, the details of open invoices for prior periods do not appear on the current-period customer
statement. ANS: T
18. In an open item accounts receivable system, the details of open invoices for both the current and prior periods appear on the current-period
customer statement.
ANS: T
19. In a prebilling billing system, invoices are prepared after the goods have been shipped and the sales order notification has been matched to the
shipping's billing notification. ANS. F
20. In a post billing system, invoices are prepared upon acceptance of the customer order, and there is no separate sales order document as such.
ANS: F
21. Digital image processing systems are computerized systems for capture, storage, and retrieval of real or simulated objects, such as live scenes
and photographs. ANS: T
22. A bar code reader is used to translate an object's image into electronic digital signals .ANS: F
23. The acronym MICR stands for magnetic information character recognition. ANS: F
24. The acronym EFT stands for electronic funds transfer. ANS: T
25. The acronym ACH stands for automated clearing house. ANS: T
26. A credit card system is better at reducing float time than a debit card system. ANS: F
27. In an open item system accounts receivable records consist of a customer's current balance due, past- due balance, and the finance charges
and payments related to the account. ANS: F
28. The B/AR/CR system supports the repetitive work routines of the credit department, the cashier, and the accounts receivable department.ANS:
T
29. A debit card is a method of payment whereby a third party, for a fee, removes from the collector the risk of noncollection of the account
receivable.
ANS: F
30. A credit card is a form of payment authorizing the collector to transfer funds electronically from the payer's to the collector's balance. ANS. F
31. An electronic check closely resembles a paper check with the inclusion of the customer's name, the seller's name, the customer's financial
institution, the check amount, and a digital signature. ANS: T
32. Lapping is a fraud resulting from the improper segregation of duties between the functions of handling cash and recording cash receipt events.
ANS: T
33. The ACH network electronically transfers funds by which the collector's bank account is credited and the payer's account is debited for the
amount of a payment.
ANS: T
34. The inventory payment data contains the details of each payment received.ANS: F
35. The stub attached to the customer statement is also known as a turnaround document.ANS: T
36. The accounts receivable master data is created as sales returns, bad debt write-offs, estimated doubtful accounts, or similar adjustments are
processed.
ANS: F
37. Electronic cash is an electronic bank note issued by a financial institution to an individual who, in turn, can transfer the electronic note to make
purchases or other payments.ANS: T
38. An electronic lockbox is a banking service in which the bank keys the remittance advice details into its computer system from the customer's
remittance advice and then transfers the remittance advice data electronically from the bank's computer to the collector's accounts receivable
computer system.
ANS: T
39. A customer relationship management system is an information systems extension that allows a customer to complete an inquiry or perform a
task within an organization's business process without the aid of the organization's employees.
ANS: F
40. In the control matrix for the cash receipts function the first present control plan should be to immediately endorse checks.
ANS: T

COMPLETION
1. The B/AR/CR process completes the order to cash process by accomplishing the activities of billing customers, managing customer accounts,
and ________
.ANS:securing payment for goods or services orcollection
2. Recording billing/accounts receivable/cash receipts event data is generally the responsibility of the accounts receivable department, which
typically reports to the
____
function. ANS: controller
3. In the organization structure shown in the text, although both report to the VP of Finance, the
___________ and ___________ functions should be segregated.. ANS: treasurer controller
4. There should be a segregation of duties between the sales department and the
department. ANS: credit
5. The objective of
is to free up funds so that they can either be invested to earn interest, or used to reduced debt, thus
reducing interest charges.
ANS: cash management
6.

, when applied to cash receipts, is the time between customer payment and the availability of funds on deposit and available.

ANS: Float
7. Funds on deposit and available are known as

funds.

ANS: good

8. A

is a postal address, maintained by the firms bank, which is used solely for the purpose of collecting checks.

ANS: lockbox
9. With

, a financial institution issues an individual cash that is placed into an electronic wallet.

ANS: electronic cash

10.

systems are Internet based systems for sending bills/invoices to customers and receiving the customer payment electronically.

ANS: EBPP
or electronic bill presentment and payment
11. A(n)
is a business document used by a vendor to notify the customer of an obligation to pay the seller for merchandise
which was ordered and shipped.
ANS: invoice
12. A(n)

is a business document designed to inform the payee of the invoices or other items covered by the check amount.

ANS: remittance advice

13. The

file is a repository of all unpaid invoices issued by an organization and awaiting final disposition.

ANS: accounts receivable master

14. The logical data dictionary definition of the

event data file would comprise one or more invoice records.

ANS: sales
15. Rejected sales requests are later processed through a separate

ANS: exception routine

16. The two types of accounts receivable systems discussed in the text are the balance only and
systems. ANS: open-item
17. In a(n)
accounts receivable system, the details of open invoices for prior periods do not appear on the current-period
customer statement.
ANS: balance-only

18. In a(n)
accounts receivable system, the details of open invoices for both the current and prior periods appear on the
current-period customer statement.
ANS: open-item
19. In a(n)
billing system, invoices are prepared after the goods have been shipped and the sales order notification has
been matched to the shipping's billing notification.
ANS: postbilling

20. In a(n)
order document as such.

billing system, invoices are prepared upon acceptance of the customer order, and there is no separate sales

ANS: prebilling
21.
processing systems are computerized systems for capture, storage, and retrieval of real or simulated objects, such as
live scenes and photographs.
ANS: Digital image (or image)
22. A(n)

or image processing camera is used to translate an object's image into electronic digital signals.

ANS: optical scanner

23. The acronym MICR stands for

ANS: magnetic ink character recognition

24. The acronym ACH stands for

ANS: automated clearinghouse

25. The acronym EFT stands for

ANS: electronic funds transfer

26. A(n)

card system has the advantage of eliminating float.

ANS: debit
27. The
department.

supports the repetitive work routines of the credit department, the cashier, and the accounts receivable

ANS: billing/accounts receivable/cash receipts (B/AR/CR)

28. In a(n)
, accounts receivable records consist of a customer's current balance due, past-due balance, and the finance
charges and payments related to the account.
ANS: balance-only system

29. A(n)
account receivable.

is a method of payment whereby a third party, for a fee, removes from the collector the risk of noncollection of the

ANS: bank credit card

30. A(n)
balance.

is a form of payment authorizing the collector to transfer funds electronically from the payer's to the collector's

ANS: debit card

31. A(n)
closely resembles a paper check with the inclusion of the customer's name, the seller's name, the customer's
financial institution, the check amount, and a digital signature.
ANS: electronic check
32.
receipt events.

is a fraud resulting from the improper segregation of duties between the functions of handling cash and recording cash

ANS: Lapping
33. The
processed.

is created as sales returns, bad debt write-offs, estimated doubtful accounts, or similar adjustments are

ANS: accounts receivable adjustments data

34. The
network electronically transfers funds by which the collector's bank account is credited and the payer's account is
debited for the amount of a payment.
ANS: automated clearing house (ACH)
35. The

contains the details of each payment received.

ANS: cash receipts event data

36. Often times a stub is attached to the customer statement. This stub is also known as a
document.
ANS: turnaround

37.
is an electronic bank note issued by a financial institution to an individual who, in turn, can transfer the electronic note
to make purchases or other payments.
ANS: Electronic cash
38. A(n)
is a banking service in which the bank keys the remittance advice details into its computer system from the
customer's remittance advice and then transfers the remittance advice data electronically from the bank's computer to the collector's accounts
receivable computer system.
ANS: electronic lockbox

39. A(n)
is an information systems extension that allows a customer to complete an inquiry or perform a task within an
organization's business process without the aid of the organization's employees.
ANS: customer self-service system
40. In the control matrix for the cash receipts function the first present control plan should be to
.
ANS: immediately endorse checks