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 invoiced that are not shipped.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

If goods are invoiced but not shipped, revenues and receivables would be overstated because sales that haven't actually occurred are being recorded. Inventory would be understated because the system would record these goods as sold and thus no longer part of inventory, even though they physically remain in stock.

Beta Pty Ltd Posts to Its Perpetual Inventory Records Directly