Beta Pty Ltd posts to its perpetual inventory records directly from its sales invoices Inadequate control procedures over the invoicing function allow goods to be shipped that are not invoiced.The inadequate control procedures could cause an:
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.

Question

Quizplus · Accepted Answer

Since goods are being shipped without being invoiced, the company is not recording the revenue and receivables that should result from those sales. This will result in an understatement of both revenues and receivables. Additionally, since the inventory records are being updated based on the unrecorded sales, the inventory balance will be overstated. Therefore, option C is the correct answer.

Beta Pty Ltd Posts to Its Perpetual Inventory Records Directly