Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate internal control over the invoicing function allows goods to be shipped that are not invoiced. The inadequate controls could cause an

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Business

Hadassah Wu

4 March, 23:58

Alpha Company uses its sales invoices for posting perpetual inventory records. Inadequate internal control over the invoicing function allows goods to be shipped that are not invoiced. The inadequate controls could cause an

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Gabriella Page · Answer 1

Among the possible answers to this question it is possible to find

a. Understatement of revenues, receivables and inventory.

b. Overstatement of revenues, and receivables and an understatement of inventory.

c. Understatement of revenues, and receivables and an overstatement of inventory.

d. Overstatement of revenues, receivables and inventory.

The correct answer is:

c. Understatement of revenues, and receivables and an overstatement of inventory.

Explanation:

If the invoice of the sale is not generated this would not communicate the message to the accounting department about the movement, reason why the income could not be registered which would result in the generation of receivables to the customers. Besides, the inventory would be affected since the merchandising would not be discount from the existing products inside the company, which will result in an overstatement of inventory.