Fin Info Systems FINAL

Ch 8-14 Practice Problems

A processing feature unique to the general ledger module is one that allows the altering of recorded transactions if they have not been permanently posted. What is the feature called?

A. Provisional posting
B. Hard posting
C. Ink posting
D. None of these; transactions are never allowed to be altered

Provisional Posting

Adjustments that must be reversed at the beginning of each accounting period are often accomplished using which data entry efficiency feature?

A. Automatic distribution entry
B. Recurring entry
C. Time-sensitive entry
D. Dollar versus cents entry

Recurring entry

Because entries can still be made in the earlier interim periods, closings for interim periods are known as what?

A. Soft closings
B. Hard closings
C. Horizontal closings
D. Vertical closings

Soft Closing

Because the financial process must recognize events that keep the general ledger accounts up-to-date, which of the following is/are included in the financial process?

A. The recognition of prepaid expenses
B. The recognition of accrued assets
C. The recognition of depreciation expense
D. All of these are included in the financial process.

All of these are included in the financial process

Which of the following is not an example of horizontal analysis?

Common dollar analysis
Data comparisons
Absolute changes
Percentage changes

Common Dollar Analysis

In accounting software packages, what are accounts that have no sub-accounts called?

Normal accounts
Master accounts
Sub-accounts
Statistical accounts

Normal Acccounts

In accounting software packages, what is the equivalent term for accounts in a subsidiary ledger?

Master accounts
Modules
Sub-accounts
Normal accounts

Sub-accounts

In what important respect is the general ledger module distinguished from the other modules?

The general ledger module is a financial reporting module.
The general ledger module is associated with specific business processes.
The general ledger module is used to record the planning and control activities related to purchases.
The general ledger module is used to record the acquisition, management, and promotion activities related to employees.

The general ledger module is a financial reporting module.

The financial process encompasses which of the following activities?

Summarized transaction and other event data from the other processes
Events that do not fall within the revenue, purchasing, or inventory processes
Events necessary to keep general ledger accounts up-to-date
All of these activities are included in the financial process.

All of these activities are included in the financial process.

What is the core activity of an accounting information system?

The revenue process
The purchasing process
The financial process
The transaction process

The financial process

What is the internal audit department's role in the control structure of the financial process?

The periodic review of management reports should be done daily by the internal audit department.
The internal audit department should be in charge of developing and reviewing all budgets.
Provision should be made for independent confirmation of data appearing in management reports.
None of these is an appropriate activity for the internal audit department.

Provision should be made for independent confirmation of data appearing in management reports.

What is the listing of account names used in the financial process along with the codes assigned to the accounts called?

Module
Chart of accounts
Inactive account
Master account

Chart of accounts

What is the term that accounting software packages use for control accounts?

Normal accounts
Chart of accounts
Sub-accounts
Master accounts

Master accounts

What type of account is used to accumulate physical, as opposed to monetary, data?

Normal account
Statistical account
Sub-account
Master account

Statistical account

What type of transaction would initially be recorded in the general ledger?

Payment of a lawsuit settlement of $5 million
Payroll
Purchases from vendors
Sales to customers

Payment of a lawsuit settlement of $5 million

What type of transaction would not initially be recorded in the general ledger?

Payment of a lawsuit settlement of $5 million
Payroll
Disposal of long-term assets
Issuance or retirement of bonds and stock

Payroll

What types of entries are recorded in the financial process?

Data captured in and transferred from other processes
Reversing entries
End-of-period adjustments
All of these are types of entries recorded in the financial process.

All of these are types of entries recorded in the financial process.

When an account is designated as an "inactive account," which of the following is true of its status?

The accounting information system will prevent further entries from being made to the account.
The account is immediately deleted from the general ledger.
Entries may still be made to the account.
The account remains active until the accounting period is closed and is deleted after the accounting period is closed.

The accounting information system will prevent further entries from being made to the account.

Which financial statements constitute the basic reporting requirements in the financial process?

Statement of owners' equity, statement of cash flow, and balance sheet
Balance sheet, income statement, and statement of cash flow
Income statement, statement of cash flow, and statement of owners' equity
Balance sheet, statement of owners' equity, and income statement

Balance sheet, income statement, and statement of cash flow

Which module composes the financial process in AIS software packages?

The customer module
The vendor module
The general ledger module
The inventory module

The general ledger module

Which of the following are efficiency features in data entry?

Recurring entries
Automatic distribution entry
Auto-enter
All of these are efficiency features in data entry.

All of these are efficiency features in data entry.

Which of the following describes an example(s) of transaction risks in the financial process?

Transactions approved/created by unauthorized persons.
Transactions for unauthorized amounts.
Adjusting entries approved/created by unauthorized persons.
All of these are examples of transaction risks in the financial process.

All of these are examples of transaction risks in the financial process.

Which of the following illustrates a difference between GAAP and IFRS?

Under IFRS, component depreciation is allowed.
Under IFRS, impairment adjustments cannot be reversed.
Under IFRS, the classification of some financial instruments will cause a change to GAAP-calculated debt ratios.
Under IFRS, whether or not an entity is consolidated has to do with whether the consolidation was handled using the purchase method.

Under IFRS, the classification of some financial instruments will cause a change to GAAP-calculated debt ratios.

Which of the following is TRUE about activities in the financial process?

File maintenance activities should be separated from daily activities.
Daily activities, file maintenance, and adjusting entries should done by a supervisor.
Adjusting entries should be done by the person who handles file maintenance activities.
Daily activities in the financial process should be handled by the person who has custody of cash.

File maintenance activities should be separated from daily activities.

Which of the following is a part of the financial process?

Inventory management
Sales order processing
Budget preparation
Vendor invoicing

Budget preparation

Which of the following is an advantage of a system that permits out-of-balance entries?

Accountants can circumvent security policies.
Accountants can correct mistakes more easily.
Accountants can debit various accounts one day and complete the offsetting credits the next day.
Accountants can close the books in a timely manner.

Accountants can debit various accounts one day and complete the offsetting credits the next day.

Which of the following is an example of vertical analysis?

Data comparisons
Absolute changes
Common dollar analysis
Percentage changes

Common dollar analysis

Which of the following is not a part of the financial process?

Budget preparation
Inventory management
Events that do not fall within the revenue, purchasing, or inventory processes
Summarized transaction and other event data from the other processes

Inventory management

Which of the following is not a type of entry in the financial process?

Data captured in and transferred from other processes to the financial process
Transactions originally recorded in the financial process
End-of-period adjustments required in the financial process
Planning and control for the purchase of inventory and other resources

Planning and control for the purchase of inventory and other resources

Which of the following is not an event that falls within the financial process because it appropriately falls within the revenue, purchasing, or inventory processes?

Payment of bond interest
Issuance of bonds
Vendor invoicing
Issuance of stocks

Vendor invoicing

Which of the following is part of the financial process because it is an event that does not fall within the revenue, purchasing, or inventory processes?

Cost accounting
Payment of stock dividends
Accounts receivable
Cash receipts

Payment of stock dividends

Which of the following processes receives summarized information from the other processes?

Revenue process
Inventory process
Financial process
Purchasing process

Financial process

Which of the following represent proper information processing controls in the financial process?

Summarized daily information should be filed for future reference.
Output distribution should be limited to authorized individuals.
Checks of transactions only need to be done on transactions posted in other departments.
All of these represent proper information processing controls in the financial process.

Output distribution should be limited to authorized individuals.

Which of the following represents a processing control in the financial process?

Input data should be verified as accurate in the various processes.
Special authorization should be required for the disposal of capital resources.
The distribution of internal reports containing financial information should be carefully controlled and recorded.
Summarized information received from other processes should be periodically reviewed to determine that the accuracy of financial statements.

Summarized information received from other processes should be periodically reviewed to determine that the accuracy of financial statements.

A prompt payment term such as "2/10:n/30" means which of the following?

The customer can earn a 2% cash discount by paying within 10 days of the invoice date.
The gross amount is due in ten days.
The customer can earn a 10% cash discount by paying within 30 days.
The customer can earn a 10% cash discount by paying within 2 days of the invoice date.

The customer can earn a 2% cash discount by paying within 10 days of the invoice date.

An aging accounts receivable report is commonly used for which of the following purposes?

As a basis for calculating the bad debt provision
As a tool for contacting customers regarding overdue amounts
All of these are purposes of an aging accounts receivable report.
As a tool for writing off small, miscellaneous, delinquent amounts

All of these are purposes of an aging accounts receivable report.

For sales analysis reporting, one of the most important factors is which of the following?

Relevant data
Precise data
Product data
Timely data

Relevant data

From time to time, an organization may decide to write off old, small amounts of accounts receivable because of which of the following?

Customers have taken allowances promised by salespeople that have not been recognized with billing.
Customers have taken discounts that they have not earned.
All of these may cause an organization to decide to write off small, apparently uncollectible amounts.
The amount is less than $20 and over ninety days old.

All of these may cause an organization to decide to write off small, apparently uncollectible amounts.

If a customer's payment is delayed for an excessive period of time, what is the appropriate notice to be sent?

A statement
An invoice
A discount
A dun

A dun

Sales, sales order processing, shipping, and accounts receivable are all part of which of the following processes?

The revenue process
The financial process
The inventory process
The purchasing process

The revenue process

The process that encompasses events related to the distribution of good and services to customers and the receipt of money in exchange for these goods and services is known as what process?

The financial process
The purchasing process
The inventory process
The revenue process

The revenue process

The revenue process encompasses which of the following?

Events related to the transformation of raw materials into finished goods
Events related to the acquisition of goods and services
Events necessary to keep general ledger accounts up-to-date
Events related to the distribution of goods and services to customers

Events related to the distribution of goods and services to customers

What are the activities encompassed by the revenue process?

Sales order receipt and processing
Advertising, promotion and sales order solicitation
All of these are activities of the revenue process.
Shipping

All of these are activities of the revenue process.

What document identifies the products and quantities ordered and gives the warehouse location, aisle number, shelf position, bin number, or other reference to the location of the goods?

Picking list
FOB
Credit memo
Remittance advice

Picking list

What is the location at which title to goods changes from the shipping organization to the customer known as?
Cash and carry
Picking list
FOB point
Standing orders

FOB point

What is the most critical report for shipping activities?

Remittance advice
Picking list
FOB
Credit memorandum

Picking list

What is the purpose of sales analysis reporting?

Customers providing disappointing gross profit on the sales dollar may be identified.
It gives management a basis for judging the performance of individual sales personnel.
All of these are valid purposes of sales analysis reports.
Historical sales data are used to provide planning and control information for managers.

All of these are valid purposes of sales analysis reports.

What is the spreading of customer billing throughout the month by dividing customer accounts into groups and billing each group at a different time during the month known as?

Remittance billing
Preauthorization billing
Rotation billing
Cycle billing

Cycle billing

What is(are) the method(s) of accounting for accounts receivable?

Open item
Balance forward
Neither balance forward nor open item is an appropriate method.
Both balance forward and open item are methods of accounting for accounts receivable.

Both balance forward and open item are methods of accounting for accounts receivable.

What is(are) the principal event(s) to be recorded in the revenue process?

Shipping order
Sales orders in the sales order module
Receipt of cash from customers
Billing of the customer
All of these are principal events to be recorded in the revenue process.

All of these are principal events to be recorded in the revenue process.

Which of the following controls ensures the accuracy of transactions in the revenue process?

Independent checks should be made to ascertain that the correct prices are being charged to pre-approved customers.
Every transaction is reviewed at the end of the month.
All of these ensure the accuracy of transactions in the revenue process.
Invoice quantities and amounts should be verified against the sales order and shipping records, with discrepancies reported if over a certain amount.

Independent checks should be made to ascertain that the correct prices are being charged to pre-approved customers.

Which of the following is a source document for cash receipts?

Credit memorandum
Remittance advice
Picking list
FOB

Remittance advice

Which of the following is an application of the recurring entry concept?

Standing orders
Automatic identification
Remittance advice
New orders

Standing orders

Which of the following is included in the revenue process?

Sales order processing
Contra accounts
Inventory management
Vendor invoicing

Sales order processing

Which of the following is not a method of payment application for open item accounts?

Intermittent identification
Automatic identification
Post-identification
Pre-identification

Intermittent identification

Which of the following is not included in the revenue process?

Accounts receivable
Shipping
Sales order processing
Payment of stock dividends

Payment of stock dividends

Which of the following is not true regarding the balance forward method of accounting for accounts receivable?

No attempt is made to match individual payments and invoices.
Payments are applied to the outstanding balance rather than to particular invoices.
The open invoice file is archived at the end of the period.
Invoice records remain in the open invoice file until payment is received.

Invoice records remain in the open invoice file until payment is received.

Which of the following is not true regarding the open item method of accounting for accounts receivable?

Payments are correlated with individual invoices.
Invoice records remain in the open invoice file until payment is received.
No attempt is made to match individual payments and invoices.
Straightforward information is provided for the preparation of an aging schedule.

No attempt is made to match individual payments and invoices.

Which of the following is true regarding the balance forward method of accounting for accounts receivable?

Payments are correlated with individual invoices.
Payments are applied to the outstanding balance rather than to particular invoices.
Invoice records remain open at the end of the period.
Invoice records remain in the open invoice file until payment is received.

Payments are applied to the outstanding balance rather than to particular invoices.

Which of the following is true regarding the open item method of accounting for accounts receivable?

Invoice records remain in the open invoice file until payment is received.
Payments are applied to the outstanding balance rather than to particular invoices.
No attempt is made to match individual payments and invoices.
The open invoice file is archived at the end of the period.

Invoice records remain in the open invoice file until payment is received.

Which of the following methods is the most commonly used payment application for open item accounts?

Post-identification
Automatic identification
Intermittent identification
Pre-identification

Pre-identification

Which of the following represent cash handling risks in the revenue process:

Improper reconciliation of the cash account.
Misappropriation of cash receipts.
All of these are associated with cash handling risks in the revenue process.
Uncollectible accounts written off without proper authorization.

All of these are associated with cash handling risks in the revenue process.

Which of the following represents the proper segregation of duties in the revenue process?

A clerk in the treasury office opens mail and posts cash receipts.
The person who handles deposits also reconciles the cash account.
Sales representatives can check on the status of shipments and make adjustments to the order.
The inventory management and shipping functions are in different buildings.

The inventory management and shipping functions are in different buildings.

Which type of report lists individual invoices by customer?

Summary aging
Detailed aging
Proprietary aging
Exclusive aging

Detailed aging

Which type of report lists individual past due invoices by customer?

Summary aging.
Detailed A/R aging.
Vendor master file.
Customer master file.

Detailed A/R aging.

While advertising, promotion, and sales solicitations are functions in the business revenue process, the costs of these activities are accounted for in which process(es)?

The inventory process
The purchases and financial processes
The financial process
The revenue process

The purchases and financial processes

With which of the methods of payment application for open item accounts is a person required to identify the open invoices being paid, as well as any credits being taken?

Post-identification
Automatic identification
Pre-identification

Pre-identification

After an organization compares the vendor invoice with the purchase order data and the receiving data, the invoice data are then keyed into what file?

Open invoice file
Purchase order file
Receiving transaction file
Accounts payable file

Open invoice file

After an organization compares the vendor invoice with the purchase order data and the receiving data, the invoice data are then keyed into which file?

Open vendor invoice file.
Open purchase order file.
Open customer invoice file.
Open accounts transaction file.

Open vendor invoice file.

An organization must have a regular schedule for making payments of invoices. Which are criteria for selection of invoices for payment?

Select all invoices with a specified vendor
Select all invoices coming due on or before a specified date
None of these are criteria.
All of these are criteria.

All of these are criteria.

Recording a payable after the invoice is matched with other documents requires which journal entry?

Debit to accounts payable; credit to unbilled payables
Debit to cash; credit to accounts payable
Debit to unbilled payables; credit to accounts payable
Debit to unbilled payables; credit to cash

Debit to unbilled payables; credit to accounts payable

"Resources" in the purchasing process refer to what?

To tangible and intangible goods and to services
To tangible goods and to intangible services
To intangible goods and to services
To intangible goods and to tangible services

To tangible and intangible goods and to services

What are alternative names for the purchasing process?

Receiving, expenditure, acquisition
Expenditure, receiving, procurement
Expenditure, procurement, acquisition
Ordering, receiving, procurement

Expenditure, procurement, acquisition

What are listings of the cash disbursements transaction file are referred to?

Check register
Accounts payable master file
Vendor master file
Invoice register

Check register

What are two major data entry processes (think of the processes that require the most entry items per transaction)?

Creation and issuance of purchase orders; recording of merchandise received and services rendered.
Creation and issuance of purchase orders; recording of cash disbursements.
Creation and issuance of purchase orders; recording of accounts payable.
Recording of merchandise received and services rendered; recording of cash disbursements.

Creation and issuance of purchase orders; recording of merchandise received and services rendered.

What documents the receipt of goods?

Ticket
Receipt verification
Invoice
Purchase validation

Ticket

What has replaced the traditional paper purchase order?

Facsimile
Electronic Data Exchange
Graphical user interfaces
Optical scanners

Electronic Data Exchange

What is a common flow of data in the purchasing process?

Receiving inventory, storing inventory, and shipping inventory
Sales order processing, shipping, invoicing, and receiving cash
Ordering goods, shipping, and disbursing cash
Ordering goods, receiving, invoicing, and disbursing cash

Ordering goods, receiving, invoicing, and disbursing cash

What is a major source of purchasing errors?

Not setting budgets for managers
Data entry errors
EDI errors
Not validating the purchase order

Data entry errors

What is a unique aspect of vendor maintenance?

1099 tasks
Add a new vendor
Tax Form 1099
Deactivate a vendor

1099 tasks

What is the most voluminous task in the purchasing process?

Purchase order data entry
Accounts payable data entry
Receiving data entry
Cash payments data entry

Purchase order data entry

What should disbursement records include?

Date, name of payee, amount of check, and vendor's invoice number
Date, name of payee, amount of check, and description of good or service
Date, name of payee, amount, description of good or service, and vendor's invoice number
Date, name and number of payee, amount of check and vendor's invoice number

Date, name and number of payee, amount of check and vendor's invoice number

When do disbursement activities begin?

After validation of receipt of goods
Upon receipt of goods
After data has been keyed into the open invoice file
Upon approval of the invoice

Upon approval of the invoice

When is a cash requirements forecast prepared?

After a schedule of aged accounts payable has been prepared
After invoices have been approved for payment
At regular intervals
Before a schedule of aged accounts payable has been prepared

At regular intervals

When is purchasing initiated?

When an order has been placed with the vendor
When inventory records indicate that the quantity on hand has reached the average order size
When a manager approves a purchase order
When a manager authorizes a purchase requisition and forwards it to the purchasing department

When a manager authorizes a purchase requisition and forwards it to the purchasing department

Where are purchase order data stored?

Open invoice file
Completed purchase order file
Open purchase order file
Inventory order file

Open purchase order file

Where is there rarely a deficiency in the audit trail between?

Purchases journal and vendor accounts
Purchases journal and cash disbursements
Cash disbursements and vendor accounts
Vendor accounts and cash disbursements

Cash disbursements and vendor accounts

Which is an example of an acquired good?

Computer programs and consultants
Patents and janitorial services
Catering company and accounting firms
Fixed assets and raw materials

Fixed assets and raw materials

Which of the following are principal reports required for effective management of the purchasing process?

Vendor invoices; discounts lost
Vendor performance; outstanding purchase orders
All of these are principal reports.

All of these are principal reports.

Which of the following are the principal reports required for the effective management of the purchasing process?

Outstanding sales orders
Vendor performance
All of these
Discounts taken

Vendor performance

Which of the following control activities ensure that the hours worked by a contractor are valid?

All employee time should be positive and bear a reasonable relationship to the standard 40-hour work week.
The contractor provides a weekly printout of time charged per job from his company's system.
The contracting office provides the names and tax identification numbers of all contractors prior to the processing of payroll.
Claims for large hours or excessive wage rates are reviewed quarterly by the Vice President of Human Resources.

All employee time should be positive and bear a reasonable relationship to the standard 40-hour work week.

Which of the following describes the best physical control(s) over cash disbursements?

Cash can be disbursed to vendors when approved by the purchasing manager.
All disbursements to vendors over $50 are made with prenumbered checks.
All of these are good physical controls over cash disbursements.
Access to inventory is limited to authorized personnel only.

All disbursements to vendors over $50 are made with prenumbered checks.

Which of the following initiates a bidding situation among suppliers?

Request for bid response; request for quotation
Request for quotation; request for proposal
Request for proposal; request for bid response
Request for deliverables; request for quotation

Request for quotation; request for proposal

Which of the following is NOT a reason why a company would be motivated to use an EDI system for purchase orders?

An EDI system is inexpensive to purchase and easy to implement.
With an EDI system, purchase orders can be sent through the computer to a vendor.
With the computerized EDI system, there is less paperwork involved.
EDI systems reduce the possibility of human data entry error.

An EDI system is inexpensive to purchase and easy to implement.

Which of the following is TRUE regarding the segregation of duties in the purchasing process?

Segregation of computerized functions can be attained through the use of passwords, file/record locks, and designated terminal access.
The authority to approve disbursement vouchers should be separate from the authority to sign checks.
All of these are true regarding the segregation of duties in the purchasing process.
The password system allows a receiving clerk to read, but not write to, an open purchase order.

All of these are true regarding the segregation of duties in the purchasing process.

Which of the following is effected through the Purchase Order module?

Monitoring of outstanding purchase orders
Issuance of purchase orders
All of these
Reporting on outstanding purchase orders

All of these

Which of the following is false regarding the accounts payable module?

A batch of checks may be posted after a proof list is prepared.
Single checks issued by a company are referred to as manual checks.
Posting may be invoked several times a day.
Printing batches of checks is an efficient way of issuing checks.

Single checks issued by a company are referred to as manual checks.

Which of the following is not correct with regard to goods and services?

Goods and services are purchased to meet an organization's needs.
Goods and services do not include services provided by the organization's employees as these are not external goods or services.
While organizations commonly use only one accounting firm, they have traditionally dealt with larger numbers of raw materials and merchandise vendors.
In recent years, considerable debate has brewed over how much competition organizations should foster among their vendors.

Goods and services do not include services provided by the organization's employees as these are not external goods or services.

Which of the following is true about retainages?

Most organizations have this feature in its payables module.
Most organizations, with the exception of construction contractors, must have retainages.
Retainages provide additional assurance that an agreed upon task will be completed.
Retainages are more applicable to payables than to receivables.

Retainages provide additional assurance that an agreed upon task will be completed.

Which of the following modules would you expect to find in the purchasing function?

Purchase Order Processing, Accounts Receivable, Receiving, Vendor Invoicing.
Sales Order Processing, Accounts Payable, Vendor Invoicing, Disbursements.
Sales Order Processing, Accounts Payable, Vendor Invoicing, Receiving, Cash Receipts.
Purchase Order Processing, Accounts Payable, Vendor Invoicing, Disbursements.

Purchase Order Processing, Accounts Payable, Vendor Invoicing, Disbursements.