Test bank accounting information system by turner 12 chapter

In the case of a manual accounting system, an approved journal voucher must be forwarded to the general ledger department before transactions can be recorded.. General ledger employees s

ACCOUNTING INFORMATION SYSTEMS

ADMINISTRATIVE PROCESSES AND CONTROLS

TURNER / WEICKGENANNT

CHAPTER 12: Administrative Processes and Controls

TEST BANK – CHAPTER 12 – TRUE / FALSE

1 The sale of bonds should be considered a regular, recurring process since these

types of transactions are recorded in the general ledger

2 Administrative processes are transactions and activities that either are specifically

authorized by top managers or are used by managers to perform administrative functions

3 Not all organizations require long-term, capital assets such as land, buildings,

and equipment to operate

4 Capital usually comes from assets or short-term debt

5 Source of operational processes are those processes to authorize the raising of

capital, the execution of raising capital, and the proper accounting of that capital

6 The board of directors must decide between debt, assets, or equity for capital

funds

7 An underwriter is a third party that contracts with a corporation to bring a new

issue of securities to the public market

8 Operations processes are those processes which authorize, execute, manage,

and properly account for debt

9 A corporation’s own stock that is repurchased by the company on the open

market is a marketable security

10 For both source of capital processes and investment processes, the important

control is the specific authorization and oversight by top management

11 Business processes in an organization do not include events that are accounting

transactions

12 Subsidiary ledgers maintain the detail information regarding routine transactions,

with an account established for each entity

13 Special journals are journals that are established to record the transactions of

specific customers and vendors

14 In the case of a manual accounting system, an approved journal voucher must

be forwarded to the general ledger department before transactions can be

recorded

15 Approvals for each journal voucher are specific authorizations

16 An example of good internal control is having one person responsible for the

value of the total of the sales in the sales journal and another person responsible for the balance of sales in the general ledger

17 General ledger employees should record journal vouchers, but they should not

authorize journal vouchers, have custody of assets, or have recording

responsibility for any special journals or subsidiary ledgers

18 A well-defined chart of accounts would contain an account titled “Rent.”

19 Because of their access to the accounting system, internal managers need less

detailed reports than external users

20 External users need detailed balance information on every existing account in the

general ledger

21 Service firm internal reports are more likely to focus on sales and the status of

projects

22 Unethical and fraudulent behaviors are much more likely to be initiated by

employees, not management

23 One of the reasons that management, not employees, initiate more unethical

and fraudulent activities are that employees do not have access to much of the documentation needed to affect the event

24 Employees are more likely to hide or conceal fraudulent activity in the records of

fixed assets and capital acquisition events than elsewhere

25 Reports disseminated to lower level managers are usually used to provide

feedback and establish production schedules or sales goals

26 To set a proper ethical tone, top managements should measure several factors

of managerial performance without over-emphasizing profitability or cost cutting

27 The only method of exercising corporate governance over administrative

processes and financial reporting is through the company’s budgeting process

28 Because of regulatory and auditing issues, good corporate governance does not

depend upon the ethical conduct of management

ANSWERS TO TEST BANK - CHAPTER 12 - TRUE/FALSE:

TEST BANK – CHAPTER 12 – MULTIPLE CHOICE

29 Capital or investment processes:

A is a regular and frequent event

B only requires the specific approval of someone such as a senior accountant

C requires the specific approval of top management or board of directors

D can be considered revenue since it results in cash inflows

30 Capital or investment processes:

A is a regular and frequent event

B do not require established procedures or internal controls due to their

infrequency

C require established procedures and internal controls even though they are

considered infrequent events

D do not involve the company’s own bond issues

31 Conversion processes, systems and controls result from transactions:

A that are large volumes of daily materials transactions

B that are large volumes of daily sales and cash inflow transactions

C that are periodic

D that are infrequent

32 Revenue and return processes, systems and controls result from transactions:

A that are large volumes of daily materials transactions

B that are large volumes of daily sales and cash inflow transactions

C that are periodic

D that are infrequent

33 Administrative processes, systems and controls result from transactions:

A that are large volumes of daily materials transactions

B that are large volumes of daily sales and cash inflow transactions

C that are periodic

D that are infrequent or intermittent

34 External reports do not include:

A balance sheets

B income statements

C sales reports

D cash flows

35 Internal reports do not include:

A balance sheets

B sales reports

C cash flows

D inventory status reports

36 Select the answer that contains only external reports

A Balance sheet, income statement, cash flow statement

B Sales, balance sheet, income statement

C Balance sheet, income statement, aged receivables

D Sales, inventory, aged receivables

37 Select the answer that contains only internal reports

A Balance sheet, income statement, cash flow statement

B Sales, balance sheet, income statement

C Balance sheet, income statement, aged receivables

D Sales, inventory, aged receivables

38 Payroll transactions are considered:

A large volume daily events

B small volume daily events

C periodic events

D intermittent or infrequent events

39 Raw material events can be found in which two processes?

A 1) Revenue and return processes, systems & controls and 2) expenditures

and return processes, systems & controls

B 1) Expenditures and return processes, systems & controls and 2) conversion

processes, systems & controls

C 1) Conversion processes, systems & controls and 2) Administrative

processes, systems & controls

D 1) Administrative processes, systems & controls and 2) Revenue and return

processes, systems & controls

40 Capital is/are the funds:

A utilized to acquire long-term and short-term or current assets

B received from customers from accounts receivable

C utilized to acquire long-term assets

D that are cash inflows regardless of source

41 The decision to raise or acquire capital funds is:

A the responsibility of contract stock underwriters

B the responsibility of contract bond underwriters

C affects only bonds

D is the responsibility of the board of directors

42 Capital funds are acquired through:

A the issuance of bonds only

B the issuance of stocks and/or bonds

C the issuance of stocks only

D the initiation of debt instruments only

43 Long-term debt is considered:

A Bonds and loans with payment schedules several years in the future

B stocks

C loans with payment due in the near future

D All of the above, A, B, and C, are examples of long-term debt

44 Equity is considered:

A Bonds and loans with payment schedules several years in the future

B stocks

C loans with payment due in the near future

D All of the above, A, B, and C, are examples of long-term debt

45 The transactions and resulting processes related to loans, bonds payable, and

stock should be executed only when

A received funds have been expended through the purchase of fixed assets

B the transactions are completed

C top supervisors authorize them

D top management or the board of directors authorize them

46 Select the correct statement from those listed below

A Issuance of bonds and the origination of loans are considered debt while

the issuance of stock is considered equity

B Issuance of bonds and the origination of loans are considered debt while

the issuance of stock is considered revenue

C Issuance of bonds, the origination of loans, and the issuance of stock are all

considered debt

D Issuance of bonds, the origination of loans, and the issuance of stock are all

considered equity

47 Items associated with debt do not include:

A interest

B maturity date

C dividends

D changes in stockholders’ equity

48 Items associated with equity include all but:

C purchase of fixed assets

D invest excess funds

50 The _ of a corporation has the responsibility for making

D chief financial officer

52 Corporations with complex IT systems:

A may automate their investment process

B still handle all investment processes manually

C generally isolate the investment process from their accounting application

D cannot forecast surplus cash levels

53 Select the true statement from those given below

A Capital processes require top management approval while investment

processes only require treasurer approval

B Both the capital process and the investment process require only treasurer

54 Fraud associated with the capital and investment process is:

A is generally the actions of the employees handling the cash associated with

transactions

B usually related to management fraud

C prevented by the use of electronic funds transfers

D usually not pursued by the Securities and Exchange Commission

55 The proper sequence of events for the accounting cycle is:

A journalize, post, trial balance, adjusting entries, financial statements, and

56 Special journals include:

A accounts receivable journal, cash receipts journal, payroll journal, purchases

journal, and sales journal

B accounts payable journal, cash disbursements journal, payroll journal,

purchases journal, and sales journal

C cash disbursements journal, cash receipts journal, general journal, payroll

journal, purchases journal, and sales journal

D cash disbursements journal, cash receipts journal, payroll journal, purchases

journal, and sales journal

57 Special journals so not include the:

A sales journal

B inventory journal

C cash receipts journal

D payroll journal

58 Special journals include the:

A accounts receivable journal

B accounts payable journal

C purchases journal

D inventory journal

59 Select the correct statement from the following

A To review purchases from a vendor inspect the purchases journal, to review

payments to a vendor inspect the cash receipts journal

B To review purchases from a vendor and review payments to a vendor

inspect the cash disbursements journal

C To review the purchases from a vendor inspect the purchases journal, to

determine inventory levels of a specific item inspect the inventory journal

D To review the payments to a vendor inspect the cash receipts journal, to

determine inventory levels of a specific item inspect the inventory journal

60 Select the correct statement from the following:

A The accounts payable journal will not show detail of purchases from a

vendor

B Details of amounts owed by a customer in are the accounts payable journal

C The sales journal contains all sales information

D Details of amounts owed to a vendor are contained in the purchases

journal

61 Select the correct statement from the following:

A If the trial balance debits equal the trial balance credits, adjusting entries

are not necessary

B Adjusting entries are made after the adjusted trial balance report is printed

C Accounts payable information in detail can be found in both the general

ledger and the accounts payable subsidiary ledger

D Financial statements must be prepared before the closing entries are

journalized

62 Sales and sales returns can affect which journals?

A Accounts receivable, accounts payable, inventory, and sales

B Accounts receivable, cash, inventory, and sales

C Accounts receivable, accounts payable, purchases, and inventory

D Sales, cash receipts, cash disbursements, inventory, and purchases

63 Special journals are:

A utilized for infrequent special journal entries

B for regular and recurring transactions

C not utilized in automated accounting processes

D often the source of information regarding a specific customer

64 The sales journal would have columns for:

A a debit to sales, a credit to accounts receivable

B a debit to cash, a debit to accounts receivable, and a credit to sales

C a debit to accounts receivable and a credit to cost of goods sold

D a debit to accounts receivable and a credit to sales

65 Subsidiary ledgers:

A would not contain the detailed information of a customer’s account

B would contain the detailed information of a customer’s account

C would contain only information related to secondary interests of the

organization

D would not be utilized in automated accounting processes

66 When special journals are utilized:

A a general journal is not required

B segregation of duties is required

C a general journal is still utilized for infrequent and unique journal entries

D a general ledger is not required

67 Corrections to posting errors are made:

A before the first trial balance

B only after the first trial balance

C when discovered

D only when directed by top management

68 Closing entries are:

A journalized in all of the special journals

B journalized in the general journal

C journalized in the subsidiary ledgers

D journalized in the general ledger

69 Closing entries:

A close all of the general ledger accounts

B end the fiscal period

C close all of the subsidiary ledger accounts

D are journalized in the subsidiary ledgers

70 Today’s automated accounting process:

A is built on a structure independent of manual accounting

B does not require special journals or subsidiary ledgers

C is built on an operational structure similar to manual accounting

D eliminate errors in the accounting process

71 Today’s automated accounting process:

A helps the user by identifying modules for activities

B precludes the use of subsidiary ledgers

C requires manual posting of general journal transactions

D All of the above, A, B, and C, are correct

72 Transactions are recorded in the special journals and subsidiary ledgers:

A at the time of the transaction

B only when approved by top management

C only during the adjusting process

D only during the closing process

73 Posting to the general ledger occurs:

A as the transaction is recorded in the special journals

B is not required if special journals are utilized

C automatically at the end of each business day

D only when proper authorization has been given

74 In automated accounting:

A paper vouchers are still required before the posting process is started

B transaction information may be held in a special module awaiting posting

C general ledger accounts are updated as transactions are recorded in special

journals

D authorization is required for each specific transaction

75 As computerized accounting systems get more and more complex and

integrated:

A the level of authorization for posting gets higher in the level of

responsibilities

B the level of authorization for posting has not changed

C the level of authorization for posting gets lower in the level of

responsibilities

D more levels of authorization are required

76 Select the correct statement from the following

A general ledger employees should have custody of any assets that they

record in the general ledger

B General ledger employees should never be given responsibility for

authorizing any journal vouchers

C General ledger employees should record journal vouchers from any

operational departments when received

D All of the above, A, B, and C, are correct

77 Select the correct statement from the following

A general ledger employees should not have custody of any assets that they

record in the general ledger

B General ledger employees should never be given responsibility for

authorizing any journal vouchers

C General ledger employees should only record journal vouchers that have

been authorized by the appropriate manager

D All of the above, A, B, and C, are correct

78 General ledger employees should record journal vouchers, but they should not

A have recording responsibility for any special journals or subsidiary ledgers

B authorize journal vouchers

C have custody of assets

D All of the above, A, B, and C, are correct

79 Segregation of duties:

A remains unchanged between computerized and manual accounting

B may be more difficult in less complex computerized accounting systems

C is not a factor with computerized accounting systems

D is not a factor with manual accounting systems

80 When transactions are posted in a computerized accounting system:

A the user must post all transactions awaiting in the module

B segregation of duties is not a factor

C can select which batches of transactions to post

D anyone with general ledger access can post the transactions

81 Within ERP systems:

A a single user with a password may be authorized to purchase and receive

the item

B segregation of duties and responsibilities allows incompatible privileges

C purchasing requires a different approval than receiving

D user profiles are not recorded within the system

82 While using a manual general ledger system, the audit trail could consist of:

A can proceed only from the source document to the journal entry

B can proceed only from the journal entry to the source document

C is only utilized by the CPA auditors

D can be from the source document to the journal entry or from the journal

entry to the source document

85 Security of source documents:

A is essential for both manual general ledger systems and IT accounting

systems

B is not a factor with IT accounting systems since the source documents are

electronic images

C is not a factor with manual general ledger systems since they are printed

documents in archive files

D None of the options, A, B, or C, are correct

86 Select the correct statement from those listed below

A Investors and creditors use nonfinancial feedback to evaluate business

performance

B Internal managers need only nonfinancial feedback for proper planning and

control of operations

C Internal managers need reports at the same frequency as external users

D Internal managers need much more frequent and detailed reports than

external users

87 Internal users:

1 need more frequent reports than external users

2 need the same reports as external users to manage the operation

3 do not utilize nonfinancial information in the planning and control of

88 The external general purpose financial statements/reports are the:

1 aged accounts payable report

2 aged accounts receivable report

3 balance sheet

4 income statement

5 inventory statement

6 statement of cash flows

7 statement of retained earnings

B are presented with complete chart of account detail

C may contain condensed data from the general ledger

D show units in inventory and dollar value of those units

90 The four general purpose financial statements:

A are generated at the end of each month

B are generated at the end of each fiscal period

C are distributed only to external users

D are distributed only to internal users

91 Internal reports of financial information:

A are standardized by the AICPA

B are the same as those distributed to the external users

C vary by the user

D are distributed on the same time schedule as external reports

92 The factor that does not affect internal reports is:

A the type of organization

B the audit status of the organization

C the underlying function being managed

D the time horizon

93 The account that a manufacturing operation and a retail firm would have in

common would be:

A raw materials

B work in process

C labor

D inventory

94 A service firm would focus on:

A raw materials and work in process

B sales and project status

C work in process and labor

D raw materials and labor

95 A common interest for manufacturing, retail, and service firms is:

A inventory

B revenues

C profitability

D Both B and C

96 Not-for-profit organizations would be interested in:

A cash flows, revenues, and expenditures

B cash flows, funding sources, and expenditures

C revenues, expenses, and funding sources

D cash inflows, cash outflows, and profits