Question

A client receives a substantial number of goods returned. The client records the return when credit memos are issued (usually one to two weeks after the item is returned). A control that would lead to timelier recording of goods returned would be: a. Prenumbering receiving reports, which are separately identified for goods returned and are used to issue credit memos. b. Aging schedules of accounts receivable. c. A reconciliation of customer accounts receivable with the accounts receivable general ledger account. d. Prenumbering credit memoranda for which all numbers are periodically accounted for.

Answer 1

d. Prenumbering credit memoranda for which all numbers are periodically accounted for.

Explanation:

credit memo, also called a memorandum, is a document issued by a seller that reduces the amount owed by a client from a previous invoice. This means that whatever the client owes to the seller will decrease after this memo is issued.

In other wobuyere credit, memo reduced SellerCorp's net sales and its accounts receivable. When BuyerCo records the credit memo, the following will occur in its accounting records: 1) a debit of $8 to Accounts Payable, and 2) a credit of $8 to Purchases Returns and Allowances (or to Inventory).