Ch07 - TB principles of accounting PDF

Preview

Summary

TB principles of accounting...

Description

CHAPTER 7 ACCOUNTING INFORMATION SYSTEMS SUMMARY OF QUESTIONS BY OBJECTIVES AND BLOOM’S TAXONOMY Item

SO

BT

Item

SO

BT

Item

SO

BT

Item

SO

BT

Item

SO

BT

4 4 4 4 1 1 2

C K K K K K K

29. 30. sg 31.

3 3 4

K K K

77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91.

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

K K K K K K C K C K K K K C K

92. 93. 94. st 95. sg 96. st 97. sg 98. st 99. sg 100. sg 101. st 102. sg 103. sg 104.

4 4 4 1 1 2 2 3 3 3 4 4 4

C K K K C K K C K K K K K

120. 121. 122.

3,4 4 4

AP C C

2,4

AN

4 4

K K

True-False Statements 1. 2. 3. 4. 5. 6. 7.

1 1 1 1 2 2 2

K C K K K K K

8. 9. 10. 11. 12. 13. 14.

2 2 2 2 2 3 3

C K C K C K K

15. 16. 17. 18. 19. 20. 21.

3 3 3 3 3 4 4

K K C K K K K

22. 23. 24. 25. sg 26. sg 27. sg 28.

sg

sg

Multiple Choice Questions 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46.

1 1 1 1 1 1 1 1 1 2 2 2 2 2 2

K K K C K C K C C K K K K K C

47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61.

2 3 3 3 3 3 3 3 3 3 3 3 3 3 3

K K K K C K K K C K K K K K C

62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76.

3 3 3 3 3 3 4 4 4 4 4 4 4 4 4

K K K C C C K K C C K K K K C

Brief Exercises 105. 106.

1 2

C K

107. 108.

3 3

C C

109. 110.

111. 112. 113.

2 2 3

AN AP AP

114. 115. 116.

3 3 3

AP AN C

117. 118. 119.

3 4

K C

Exercises 3 3,4 3,4

C C AN

Completion Statements 124. 125. sg st a

1 2

K K

126. 127.

3 3

K K

128. 129.

4 4

K K

130. 131.

This question also appears in the Study Guide. This question also appears in a self-test at the student companion website. This question covers a topic in an appendix to the chapter.

123.

7-2

Test Bank for Accounting Principles, Eighth Edition

SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE Item

Type

Item

Type

Item

Type

Item

Type

Item

1. 2. 3.

TF TF TF

4. 26. 27.

TF TF TF

32. 33. 34.

5. 6. 7. 8.

TF TF TF TF

9. 10. 11. 12.

TF TF TF TF

28. 41. 42. 43.

13. 14. 15. 16. 17. 18. 19.

TF TF TF TF TF TF TF

29. 30. 48. 49. 50. 51. 52.

TF TF MC MC MC MC MC

53. 54. 55. 56. 57. 58. 59.

Study Objective 1 MC 35. MC 38. MC 36. MC 39. MC 37. MC 40. Study Objective 2 TF 44. MC 97. MC 45. MC 98. MC 46. MC 106. MC 47. MC 111. Study Objective 3 MC 60. MC 67. MC 61. MC 99. MC 62. MC 100. MC 63. MC 101. MC 64. MC 107. MC 65. MC 108. MC 66. MC 109.

75. 76. 77. 78. 79. 80. 81.

Study Objective 4 MC 82. MC 89. MC 83. MC 90. MC 84. MC 91. MC 85. MC 92. MC 86. MC 93. MC 87. MC 94. MC 88. MC 102.

20. 21. 22. 23. 24. 25. 31.

TF TF TF TF TF TF TF

68. 69. 70. 71. 72. 73. 74.

MC MC MC MC MC MC MC

Note: TF = True-False MC = Multiple Choice

BE = Brief Exercise Ex = Exercise

Type

Item

Type

Item

Type

MC MC MC

95. 96. 105.

MC MC BE

124.

C

MC MC BE Ex

112. 123. 125.

Ex Ex C

MC MC MC MC BE BE BE

113. 114. 115. 116. 117. 118. 119.

Ex Ex Ex Ex Ex Ex Ex

120. 126. 127.

Ex C C

MC MC MC MC MC MC MC

103. 104. 110. 118. 119. 120. 121.

MC MC BE Ex Ex Ex Ex

122. 123. 128. 129. 130. 131.

Ex Ex C C C C

C = Completion

The chapter also contains one set of ten Matching questions and four Short-Answer Essay questions.

Accounting Information Systems

7-3

CHAPTER STUDY OBJECTIVES 1. Identify the basic concepts of an accounting information system. The basic principles in developing an accounting information system are cost effectiveness, useful output, and flexibility. Most companies use a computerized accounting system. Smaller companies use entry-level software such as QuickBooks or Peachtree. Larger companies use custom-made software packages, which often integrate all aspects of the organization. 2. Describe the nature and purpose of a subsidiary ledger. A subsidiary ledger is a group of accounts with a common characteristic. It facilitates the recording process by freeing the general ledger from details of individual balances. 3. Explain how companies use special journals in journalizing. Companies use special journals to group similar types of transactions. In a special journal, generally only one line is used to record a complete transaction. 4. Indicate how companies post a multi-column journal. In posting a multi-column journal: (a)

Companies post all column totals except for the Other Accounts column once at the end of the month to the account title specified in the column heading.

(b)

Companies do not post the total of the Other Accounts column. Instead, they post the individual amounts comprising the total separately to the general ledger accounts specified in the Account Credited (Debited) column.

(c)

The individual amounts in a column posted in total to a control account are posted daily to the subsidiary ledger accounts specified in the Account Credited (Debited) column.

7-4

Test Bank for Accounting Principles, Eighth Edition

TRUE-FALSE STATEMENTS 1.

An accounting information system should be cost effective; that is, the benefits of the information must outweigh the cost of providing it.

2.

An accounting system has flexibility if it is able to be used by many different companies at the same time.

3.

General ledger accounting systems are software programs that integrate the various accounting functions related to sales, purchases, cash receipts and disbursements, and payroll.

4.

Enterprise resource planning systems integrate all aspects of the organization, including accounting, sales, human resource management, and manufacturing.

5.

A subsidiary ledger is a group of control accounts which provides information to the managers for controlling the operation of the company.

6.

An accounts receivable subsidiary ledger has all the detailed information about the cash sales to individual customers.

7.

The accounts payable subsidiary ledger provides detailed information about amounts owed to creditors.

8.

The total of the individual account balances in the accounts receivable subsidiary ledger should agree with the total of the individual account balances in the accounts payable subsidiary ledger.

9.

Control accounts are always located in the general ledger.

10.

A control account and subsidiary ledger can be established for inventory.

11.

A subsidiary ledger provides up-to-date information on specific account balances.

12.

An advantage of using a subsidiary ledger is that one employee must post to both the subsidiary ledger and the general ledger.

13.

Special journals are used to record unique transactions which do not occur very often.

14.

A cash receipts journal can be used to record all transactions involving cash coming into the business, regardless of the source.

15.

The cash payments journal only has one column because all entries recorded in this journal require a credit to the Cash account.

16.

A cash payments journal should not be used to record transactions which require payment by check.

17.

If a transaction cannot be recorded in a special journal, it indicates that the company should adopt an electronic accounting system.

Accounting Information Systems

7-5

18.

A debit column for Sales Returns and Allowances may be found in the cash payments journal.

19.

A one-column purchases journal is used to record purchases of merchandise on account.

20.

Using special journals can save time in posting because column totals are often posted rather than individual entries.

21.

The reference column in a sales journal is used to indicate the general ledger account number when the entry is posted.

22.

Postings are generally made more frequently to the general ledger control accounts than to the individual accounts in the subsidiary ledgers.

23.

The amounts appearing in the Merchandise Inventory column of the cash payments journal are posted individually to the accounts in the accounts payable subsidiary ledger.

24.

Transaction amounts recorded in the general journal are never posted to accounts in the subsidiary ledger.

25.

When control and subsidiary accounts are involved, there must be a dual posting.

Additional True-False Questions 26.

An accounting information system involves data collection, data processing, and information dissemination.

27.

The basic principles of an accounting information system are cost awareness, usefulness, and fixed structure.

28.

Each general ledger control account balance must equal the composite balance of the individual accounts in the related subsidiary ledger at the end of an accounting period.

29.

When special journals are employed, all postings must be monthly or daily but cannot be both.

30.

Totaling the columns of a journal and proving the equality of the totals is called footing and cross-footing a journal.

31.

Only transactions that cannot be entered in a special journal are recorded in the general journal.

Answers to True-False Statements Item

1. 2. 3. 4. 5.

Ans.

T F T T F

Item

6. 7. 8. 9. 10.

Ans.

F T F T T

Item

11. 12. 13. 14. 15.

Ans.

T F F T F

Item

16. 17. 18. 19. 20.

Ans.

F F T T T

Item

21. 22. 23. 24. 25.

Ans.

F F F F T

Item

26. 27. 28. 29. 30.

Ans.

T F T F T

Item

31.

Ans.

T

7-6

Test Bank for Accounting Principles, Eighth Edition

MULTIPLE CHOICE QUESTIONS 32.

The principle of an efficient accounting system that states that an accounting system should accommodate a variety of users is a. cost effectiveness. b. flexibility. c. useful output. d. implementation.

33.

Which of the following is not a basic principle of designing and developing an effective accounting information system? a. Approval by the SEC b. Usefulness c. Flexibility d. Cost effectiveness

34.

A company will usually replace a manual accounting information system with an electronic system as the operations increase in a. efficiency. b. complexity. c. simplicity. d. productivity.

35.

In developing an accounting system, cost effectiveness does not imply that a. the benefits obtained from the system outweigh the costs. b. an electronic system must be cheaper than the system it is replacing. c. the system should be cost effective. d. the value of an accounting report should be at least equal to the cost of producing it.

36.

To be useful, the information outputs of a system should be a. relevant, reliable, timely, and accurate. b. reliable, flexible, understandable and timeless. c. such that one report meets all different users needs. d. distributed only to management personnel.

37.

The accounting environment does not change as a result of a. technological advances. b. government regulation. c. the double entry system. d. organizational growth.

38.

The principles of developing an accounting information system do not include a. usefulness. b. flexibility. c. cost effectiveness. d. elimination of human involvement.

Accounting Information Systems

7-7

39.

A student should recognize a need to study manual accounting systems because a. the structure of electronic systems differs greatly from manual systems. b. all small companies only use manual accounting systems. c. the software and hardware of electronic systems vary greatly, which makes manual procedures more practical to study. d. companies that use manual systems hire more accountants.

40.

Which of the following is a true statement about manual and electronic accounting systems? a. Few small companies begin with manual systems. b. The design and structure of manual and electronic systems are essentially the same. c. Many companies convert from electronic to manual systems. d. The design and structure of manual and electronic systems are fundamentally different.

41.

Postings to the control accounts in the general ledger are made a. annually. b. daily. c. monthly. d. weekly.

42.

The balance of a control account in the general ledger a. must always be zero. b. must equal the amount of total assets. c. is always greater than the composite balance of individual accounts in a related subsidiary ledger. d. must equal the composite balance of individual accounts in a related subsidiary ledger.

43.

A subsidiary ledger is a. used in place of the general ledger if the general ledger is destroyed or stolen. b. a group of accounts used by branches and subsidiaries of a corporate business. c. a group of accounts with a common characteristic that provides detailed information about a control account in the general ledger. d. used to post excess transactions if a general ledger account becomes full during an accounting period.

44.

Postings are made daily to the a. Accounts Receivable control account. b. Accounts Payable control account. c. Accounts Receivable subsidiary ledger. d. control accounts in the general ledger.

45.

A subsidiary ledger frees the general ledger from details of a. individual balances. b. external transactions. c. internal transactions. d. the control account.

7-8

Test Bank for Accounting Principles, Eighth Edition

46.

A company would not likely use subsidiary ledgers for a. inventory. b. owner's capital. c. equipment. d. accounts receivable.

47.

Postings are made daily to subsidiary ledgers so that a. employees are kept busy. b. debits equal credits. c. individual account information is kept current. d. the control account will balance to the subsidiary ledger.

48.

The individual amounts in the sales journal are posted to the accounts receivable subsidiary ledger a. daily. b. weekly. c. monthly. d. yearly.

49.

A sales journal is used to record a. only cash sales of merchandise. b. sales of all assets on credit and for cash. c. only credit sales of merchandise. d. credit sales of merchandise, sales returns and allowances, and sales discounts.

50.

If a transaction cannot be recorded in a special journal a. the company must refuse to enter into the transaction. b. it is recorded in the general journal. c. it is recorded directly in the accounts in the general ledger. d. it is recorded as an adjustment on the work sheet.

51.

The one characteristic that all entries recorded in a cash receipts journal have in common is a. a credit to the Cash account. b. that they all represent collections from customers. c. that they originate from the sales of merchandise. d. a debit to the Cash account.

52.

A one column purchases journal indicates that a. only purchases of merchandise on account can be recorded. b. all purchases of merchandise can be recorded. c. all acquisitions on account can be recorded. d. another column must be added so that debits and credits can be recorded.

53.

The one characteristic that all entries recorded in a multi-column purchases journal have in common is a a. credit to the Cash account. b. debit to the Cash account. c. debit to the Accounts Payable account. d. credit to the Accounts Payable account.

Accounting Information Systems

7-9

54.

A company which uses special journals should record a transaction involving the purchase of merchandise for cash in a a. one column purchases journal. b. multi-column purchases journal. c. cash payments journal. d. general journal.

55.

If merchandise from a cash sale is returned by a customer for a refund, the sales return is recorded in the a. general journal. b. cash receipts journal. c. cash payments journal. d. sales journal.

56.

Which of the following is not a special journal? a. Sales journal b. Purchases journal c. General journal d. Cash receipts journal

57.

Correcting entries are journalized in a. a special journal. b. the general journal. c. the general ledger. d. a correcting journal.

58.

Adjusting entries are recorded a. only on the worksheet. b. only in the general ledger. c. in the general journal. d. in the special journals.

59.

All of the column totals in the cash receipts journal are posted to general ledger accounts except the a. Accounts Receivable column total. b. Cash column total. c. Sales column total. d. Other Accounts column total.

60.

If a transaction cannot be recorded in a special journal, it is a. not recorded. b. a correcting entry. c. recorded in the general journal. d. an error.

61.

A company uses a sales journal, cash receipts journal, purchases journal, cash payments journal, and a general journal. A cash sales return would be recorded in the a. sales journal. b. cash receipts journal. c. cash payments journal. d. general journal.

7 - 10

Test Bank for Accounting Principles, Eighth Edition

62.

The entries in a sales journal will show a. all sales of merchandise. b. the cash sales of the company. c. the credit sales of merchandise. d. all sales of the company.

63.

Entries in a sales journal a. are made from sales invoices. b. will indicate the invoice number in the reference column of the sales journal. c. will occupy two lines of the sales journal. d. indicate either a cash...