Chapter 11: Transaction cycle – the expenditure cycle
Multiple-choice questions
1. The expenditure cycle commences when:
*a. a section of the organisation signals a need for goods or services to be
provided.
b. the goods or services that are acquired by a section of the organisation have
been paid for.
c. purchase orders are appropriately authorised.
d. delivered goods are received.
Correct answer: a
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
2. The overall objective of the purchasing phase in the expenditure cycle is to:
a. procure the right goods at the right amount and with the right price.
b. procure the right goods at the right amount and with the right supplier.
*c. procure the right goods at the right amount, and to receive those goods at the
right time.
d. procure the right goods at the right amount, and to update the accounts payable
record.
Correct answer: c
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
3. To achieve the overall objective of the purchasing phase in the expenditure cycle, an
organisation needs to:
a. approve and authorise initiated purchases properly.
b. ensure that accepted goods and services must meet quality and delivery
specifications.
c. record all purchase commitments and obligations accurately.
*d. all of the options are correct.
Correct answer: d
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
, Chapter 11: Transaction cycle – the expenditure cycle
4. The overall objective of the accounts payable phase in the expenditure cycle is to:
a. maintain the accounts payable record.
*b. pay the right people the right amount at the right time
c. determine whether an invoice should be paid.
d. ensure suppliers are neither overpaid nor underpaid.
Correct answer: b
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
5. To decide whether a payment should be made to a supplier, an accounts payable clerk
should:
*a. examine the receiving report.
b. be involved in the interaction with suppliers of the goods during the
purchasing phase
c. ensure there are on-going good relationships with suppliers.
d. search for any unpaid invoices from that supplier.
Correct answer: a
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
6. Which of the following is NOT a concern of the expenditure cycle?
a. Favourable settlement terms are negotiated with the supplier.
b. Payments match supplier invoice, purchase order and delivery docket.
c. Payments are made by authorised employees
*d. There are sufficient goods in the finished goods inventory to fulfil the
customer’s order.
Correct answer: d
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
7. The business process of paying the right people the right amount at the right time is
called:
a. cash sales.
b. accounts receivable.
*c. accounts payable.
d. general ledger updating.
Correct answer: c
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
11.1
, 8. Goods and services should be obtained from:
*a. authorised and pre-vetted suppliers.
b. suppliers that ask for the lowest price.
c. suppliers that provide the highest quality.
d. suppliers within the closest geographic proximity to the company as this will
provide lower transport costs.
Correct answer: a
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
9. Which of the following does not need to be undertaken during the accounts payable
phase?
a. The making of payments by authorised employees only.
b. The making of both accurate and timely payments.
c. Maximisation of any settlement terms.
*d. Procuring the right goods for the right amount and at the right time.
Correct answer: d
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
10. Which of the following is a vital indicator when deciding whether a payment should
be made to a supplier?
a. The manager’s authorisation and agreement.
b. The receipt of a receiving report from the warehouse department.
*c. Goods are received in sufficient quantity and good quality.
d. The supplier has provided the company with an invoice.
Correct answer: c
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
11.2
Multiple-choice questions
1. The expenditure cycle commences when:
*a. a section of the organisation signals a need for goods or services to be
provided.
b. the goods or services that are acquired by a section of the organisation have
been paid for.
c. purchase orders are appropriately authorised.
d. delivered goods are received.
Correct answer: a
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
2. The overall objective of the purchasing phase in the expenditure cycle is to:
a. procure the right goods at the right amount and with the right price.
b. procure the right goods at the right amount and with the right supplier.
*c. procure the right goods at the right amount, and to receive those goods at the
right time.
d. procure the right goods at the right amount, and to update the accounts payable
record.
Correct answer: c
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
3. To achieve the overall objective of the purchasing phase in the expenditure cycle, an
organisation needs to:
a. approve and authorise initiated purchases properly.
b. ensure that accepted goods and services must meet quality and delivery
specifications.
c. record all purchase commitments and obligations accurately.
*d. all of the options are correct.
Correct answer: d
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
, Chapter 11: Transaction cycle – the expenditure cycle
4. The overall objective of the accounts payable phase in the expenditure cycle is to:
a. maintain the accounts payable record.
*b. pay the right people the right amount at the right time
c. determine whether an invoice should be paid.
d. ensure suppliers are neither overpaid nor underpaid.
Correct answer: b
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
5. To decide whether a payment should be made to a supplier, an accounts payable clerk
should:
*a. examine the receiving report.
b. be involved in the interaction with suppliers of the goods during the
purchasing phase
c. ensure there are on-going good relationships with suppliers.
d. search for any unpaid invoices from that supplier.
Correct answer: a
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
6. Which of the following is NOT a concern of the expenditure cycle?
a. Favourable settlement terms are negotiated with the supplier.
b. Payments match supplier invoice, purchase order and delivery docket.
c. Payments are made by authorised employees
*d. There are sufficient goods in the finished goods inventory to fulfil the
customer’s order.
Correct answer: d
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
7. The business process of paying the right people the right amount at the right time is
called:
a. cash sales.
b. accounts receivable.
*c. accounts payable.
d. general ledger updating.
Correct answer: c
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
11.1
, 8. Goods and services should be obtained from:
*a. authorised and pre-vetted suppliers.
b. suppliers that ask for the lowest price.
c. suppliers that provide the highest quality.
d. suppliers within the closest geographic proximity to the company as this will
provide lower transport costs.
Correct answer: a
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
9. Which of the following does not need to be undertaken during the accounts payable
phase?
a. The making of payments by authorised employees only.
b. The making of both accurate and timely payments.
c. Maximisation of any settlement terms.
*d. Procuring the right goods for the right amount and at the right time.
Correct answer: d
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
10. Which of the following is a vital indicator when deciding whether a payment should
be made to a supplier?
a. The manager’s authorisation and agreement.
b. The receipt of a receiving report from the warehouse department.
*c. Goods are received in sufficient quantity and good quality.
d. The supplier has provided the company with an invoice.
Correct answer: c
Learning objective 11.1 – reflect on the key objectives and strategic implications of the
expenditure cycle.
11.2
