Inventories can can simply be defined as asset items that a company holds for sale in the ordinary course of business, or items that will be used or consumed in the production of goods to be sold.

Inventory Turnover Ratio measures number
of times a company sells average level of
merchandise inventory during a period.

Lower of Cost or Market Value Method (LCM) is a valuation method which requires inventory to be reported in financial statements at whichever is lower – its historical cost or its market value.

Factoring is the business of purchasing receivables from companies upon a fee for the services performed to manage and collect receivables. The correct answer is D.

When the company sells its goods or services on cash basis, there would be no need to consider for accounts receivables. In such a case, cash account is debited; the sales revenue account is credited. As we have mentioned before, if the company sells its goods and services on credit, then it has to debit accounts receivables. The correct answer is A.

There are two types of frauds: misappropriation of assets and fraudulent financial reporting. The correct answer is E. 

The other way in which uncollectible receivables can be calculated is through Direct Write-off Method, which is mainly used by relatively small and private companies. Under this method, a company does not estimate bad debts losses and does not use allowance account for the expenses based on estimates. Instead, when a specific receivable is considered to be uncollectible or worthless, the loss amount is charged directly to the uncollectible account expense.
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Service companies, such as hospitals, hotels, law firms etc., provide services to demanding parties without incurring any manufacturing or trading activities. The correct choice is E.

Normally, companies collect account receivables in cash and remove it from the books simultaneously. However, in recent years as credit sales and receivables have grown considerably, some companies have started to sell their receivables to other companies in order to accelerate receipt of cash from receivables. The most practiced method to sell receivables is the sale to a factor, also called as factoring. Factoring arrangements vary extensively. However, factors (the buyer of the receivables) charge a fee or commission for their services. In today’s world, many businesses have reduced their investments in receivables by encouraging customers to pay via credit cards such as Visa or Master. The credit card companies pay these businesses and later bill the customers. The working of debit cards is slightly different than the working of credit cards. Using a debit card is similar to paying with cash, except that the customers will not have to carry cash with them. When debit card is swapped by retailer at the point of sale terminal (POS) or cash counter, the bank balance of the customer is automatically reduced and the amount is transferred to retailer’s account.

Perpetual Inventory System is a system of tracking and recording inventory and costs of goods sold on a continual basis, so current inventory balance can be calculated on real time basis, and the accounting system can display the current inventory balance at any point in time. The perpetual inventory system keeps a running computerized record of merchandise inventory, that is, the number of inventory units and the money amounts associated with the inventory are perpetually (continuously) updated.

Raw Materials Inventory reports the cost of goods and materials on hand which will be used in production.

The specific identification method uses the specific cost of each inventory unit to determine ending inventory and cost of goods sold. Specific identification requires that companies keep records of the original cost of each individual inventory item. In the specific identification method, the company knows exactly which item was sold and exactly what the item cost.

Cash includes coins, currency (paper money), checks, money orders, and deposits in checking and savings accounts.

Despite many advantages, online banking may pose new types of risks about cybersecurity. To protect the business against these risks, the management should establish new control procedures such as anti-virus programs, firewalls, filtering systems, periodic software updates, passwords, secure logins, limited access, etc.

Fraud Triangle has three components: pressure, opportunity, and rationalization. These components refer to some factors that allow committing both types of fraud.

As the example suggests, higher percentages are assigned to the older receivables because the lengthier a receivable is past due, there are more chances that it will be uncollectible.

Information on inventories is very important for merchandising companies, as most of their activities base on inventories. In accounting for inventories, these companies have two options:
a. Periodic inventory system and
b. Perpetual inventory system. The correct answer is B.

The correct answer is C. Sales allowances account is a contra-sales revenue account. 

Bad debt expense is an income statement account that shows the losses incurred due to uncollectible receivables. The correct answer is E.

Aging of accounts receivable is the analysis of customer balances with respect to the length of time they have not been paid.