Retailer companies are not among the service companies

The principles regarding control activities are as follows: • The organization selects and develops control activities that contribute to the mitigation of risks to the achievement of objectives to acceptable levels. • The organization selects and develops general control activities over technology to support the achievement of objectives. • The organization deploys control activities through policies that establish what is expected and procedures that put policies into action.

Periodic Inventory System is an inventory system which relies upon physical count of the inventory to determine the ending inventory balance and cost of goods sold.

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.4 The specific identification method is impractical unless each unit can be identified accurately. This costing method is best for businesses that sell unique, easily identified inventory items, such as jeweler (a specific diamond earring), an automobile dealer (each automobile has a unique serial number) and real estate (identified by address). This method requires the business maintains detailed records of inventory sales and purchases as well as carefully identifying the inventory sold.E is the right answer.

First-In, First-Out (FIFO) Method an inventory costing method in which the first costs into inventory are the first costs out to cost of goods sold. Ending inventory is based on the costs of the most recent purchases. The correct choice is A.

Fraud is an intentional misrepresentation of facts which is made for purpose of persuading another party to act in a way that causes injury or damage to that party.

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

It can be said that the internal control system is sufficient if the fraud done by a single personnel can be detected. It may be easier to identify actions by several people. Therefore, B, C and C options may be considered incorrect. Errors and tricks that can be made in the enterprise can be performed not only by management personnel but also by all personnel. Therefore, option A is considered false.

The correct answer is C. In accordance with the principle of separation of duties, access to assets should be provided by authorized persons in ensuring internal control.

Valuation of accounts receivable is one of them

Return facility is often part of a company’s marketing program that enables it to maintain competitiveness. It is basically a contra sales account that records (1) any goods returned by the customers and (2) any allowance given to a customer because the company delivered defective or improper goods. As a result, this will reduce the company’s account receivable. E is the right answer.

Internal control is a process, affected by an entity’s board of directors, management, and other personnel,
designed to provide reasonable assurance regarding the achievement of objectives relating to operations,
reporting, and compliance. The correct answer is A.

Anticipate no gains, but provide for all probable losses.If in doubt, record an asset the lowest reasonable amount and reliability at the highest reasonable amount.
• When there is a question, record an expense rather than an asset.
• When you are faced with a decision between two possible options, you must choose the option that undervalues, rather than overvalues, your business
The purpose of conservatism is to report realistic figures and never exaggerate assets or net income.

• Businesses can keep their important amount of cash in a bank instead of keeping on hand.
• It is a way of protecting cash from possible thefts.
• It requires approval from both the business and the bank.
• All of the statements above are true for bank accounts and their use as a control device

Usually, customers are allowed to return the goods to the sellers in any unsatisfactory situation, such as defective, damaged or under-performing products, etc. Purchase returns exist when sellers allow purchasers to return merchandise that is defective, damaged, or under-performing

Companies often offer a cash discount to its customers if they agree to pay within a designated period. In other words, the opportunity to get a cash discount usually arises for a customer when a company either wants to encourage prompt payment or because of competitive reasons and also to increase the chances of collection. Cash discounts are intended to encourage
the customer to make their payment earlier.

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

Risk Assessment: It is a process to identify and assess risks to the achievement of objectives. Accordingly, this process forms a basis to determine the way of risk management. Because of the numbers and diversity of the risk that the businesses are subject to, risk assessment must be a dynamic and iterative process in this changing environment. The correct answer is D.

Companies continuously update the inventory account whenever a transaction occurs in Perpetual inventory system ?

• Periodic inventory system is used by the companies with inexpensive inventories
• Periodic inventory system is used by the companies manual accounting systems.
• Perpetual inventory system provides high level of control over inventories.