Describe good cash management practices involving inventory purchases
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Select all that apply
Describe good cash management practices involving inventory purchases. (Check all that apply.)
Invoices should be paid on the last day of the discount period.
Inventory should be purchased with cash whenever possible.
Buyers should take advantage of early payment discounts.
Invoices should be paid on the first day of the discount period.
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- Direction: Read the statements carefully. Write TRUE if the statement is correct. Otherwise, write FALSE. 1. The sum of the time taken from the payment for the purchase of the raw material inventories to the receipt of cash from customers is known as the accounts receivable cycle. 2. It is wise to offer unlimited credit to any potential customer who seeks it to have more sales. 3. One way to establish effective administration of receivables is to systematically review them and that slow payers are sent reminders. 4. An objective of working capital management is to maximize the length of the operating cash cycle. 5. Low inventories imply more frequent ordering. 6. The Economic Order Quantity model is designed to determine how much total inventory a firm needs in a year. _7. Control of working capital through the use of detailed plans in the form of budgets can be very beneficial. 8. One of the 5Cs of Credit is character. It refers to the customer's willingness to meet credit…The cash discount (also known as purchase discount) is given to customers for a. Frequent purchases b. Bulk purchase c. Early and prompt payments d. Frequent salesClearly explain the advantages and disadvantages of cash on delivery transactions and credit sales. Relate your answers to the management of accounts receivable. b. What steps should be taken by a business to reduce/eliminate excessive inventory? Explain your answer clearly.
- A cash discount on purchases should be debited to ______________ Select one: A. a revenue account B. a creditor account C. a debtor account D. an expense accountMatch each document in a voucher system with its description. Document 1. Purchase requisition 2. Purchase order 3. Invoice 4. Receiving report 5. Invoice approval 6. Voucher Description A. An itemized statement of goods prepared by the vendor listing the customer’s name, items sold, sales prices, and terms of sale. B. An internal file used to store documents and information to control cash payments and to ensure that a transaction is properly authorized and recorded. C. A document used to place an order with a vendor that authorizes the vendor to ship ordered merchandise at the stated price and terms. D. A checklist of steps necessary for the approval of an invoice for recording and payment; also known as a check authorization. E. A document used by department managers to inform the purchasing department to place an order with a vendor. F. A document used to notify the appropriate persons that ordered goods have arrived, including a description of the quantities and condition of…The total of settlement discount granted column in cash receipts journal will be posted to the...in general ledger Options to choose from: 1. A debit side of the settlement discount granted account 2. Credit side of the sales returns account 3. Credit side of the credit losses account 4. Debit side of the sales returns account 5. Credit side of the settlement discount granted account
- 1. A special journal contains columns for Cash, Purchases Discounts and Accounts Payable. This journal is a (an) A. Invoice Register B. Sales Journal C. Cash Receipts Journal D. Cash Disbursements Journal 2. Which of the following is true of a voucher system? A. All major expenditures, including cash transactions for payment of rent and utilities expense, would first be credited to Vouchers Payable before payment is made. B. Transactions are first entered in the check register, and later, when payment is made, in the voucher register. C. The check register replaces the cash receipts journal. D. The voucher register contains a debit column for Vouchers Payable 3. An accounting clerk would take first which of the following steps? A. Post individual amounts to the subsidiary ledgers. B. File source documents C. Journalize the business transaction D. Post to the general ledgers. 4. The book of original entry that will accommodate entries which cannot be appropriately recorded in any of the…As a company accounts payable manager, which of the following credit terms are most likely to entice you to take the cash discount? A. 2/10 net 90 B. 1/10 net 45 C. 2/10 net 60 D. 1/10 net 30Which of the following documents associated with the purchases and cash disbursements cycle is most likely to lead to a journal entry that debits inventory and credits accounts payable? A Purchase requisition, purchase order and receiving report B Purchase order, receiving report and invoice C Purchase requisition, receiving report and invoice D None of these
- CASE SUMMARY: Retailers commonly track customer's shopping patterns and target them with special offers. For example, PTS an Extra care card that, when swiped at checkout applies discounts to purchases and provides rebates called Extra Bucks to be used as cash on future purchases. Behind the scenes, PTS has gathers data on customer’s purchases and using aggregated data to target individuals with special offers. Customers who have not recently shopped may receive a discount in the mail or an online offer to incentive them to return. Questions Identify the existing ethical dilemma for companies collecting data including personally identifying data on their customers. What is your personal recommendation on what actions companies should take with regard to data collection activities?To minimize errors in the accounts payable function, which of the following procedures should be performed? approving the purchase requisition following up on open purchase orders double checking the math on the bank reconciliation matching the supplier’s invoice to the receiving reportA company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? Group of answer choices 1.The person in accounts payable should generate the purchase order. 2.The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. 3.No changes would be made since the person paying the bills is different from the person ordering the inventory. 4.The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.