Deck 2: Transaction Processing in the Ais

Question 1

Which of the following steps in the accounting cycle occurs first?

A)Analyze transactions.
B)Close the temporary accounts to retained earnings.
C)Prepare an unadjusted trial balance.
D)Record the transactions in a journal.

Answer 1

A

Question 2

Plant assets, such as equipment, are reported on financial statements at their book value, thus exemplifying:

A)The measuring process in accounting only.
B)The measuring process in bookkeeping only.
C)The measuring process in both accounting and bookkeeping.
D)Informed judgments as part of the definition of bookkeeping.

Answer 2

C

Question 3

Which of the following sets includes amounts from a single financial statement?

A)Cash, sales, interest earned
B)Cash, accounts receivable, interest earned
C)Cash, accounts receivable, accounts payable
D)Sales, accounts receivable, interest earned

Answer 3

C

Question 4

An accountant received a stack of sales invoices. Which of the following statements is most true?

A)The stack of sales invoices can help the accountant identify economic information, which is part of both accounting and bookkeeping.
B)The accountant is a "user of information" as the phrase is used in the definition of bookkeeping only.
C)The accountant is a "user of information" as the phrase is used in the definition of accounting only.
D)The stack of sales invoices can help the accountant identify economic information, which is part of bookkeeping, but not accounting.

Question 5

Communicating information to external decision makers is accomplished through ___ as part of the process of ___.

A)Financial statements, bookkeeping
B)Financial statements, accounting
C)Journal entries, bookkeeping
D)Journal entries, accounting

Question 6

Most companies make adjusting entries for depreciation because:

A)Their plant assets lose market value over time.
B)The matching concept must be upheld in financial statements.
C)Both A and B.
D)Neither A nor B.

Question 7

Please refer to the following unadjusted trial balance in answering the below question. When VLN completes the ninth step in the accounting cycle, all of the following accounts will be involved except:

A)Advertising expense
B)Deferred revenue
C)Retained earnings
D)Sales

Question 8

Which of the following phrases most closely relates to bookkeeping?

A)Identifying and measuring economic information
B)Communicating economic information
C)Permitting informed judgments by users
D)Permitting informed decisions by users

Question 9

Which step in the accounting cycle immediately precedes closing the temporary accounts?

A)Analyze transactions.
B)Prepare an adjusted trial balance.
C)Prepare financial statements.
D)Record adjusting entries.

Question 10

The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information is called:

A)Accounting
B)Bookkeeping
C)Making journal entries
D)Preparing financial statements

Question 11

Which of the following is an example of a deferred revenue?

A)A university receives cash from students prior to the start of classes.
B)A convenience store sells newspapers to its customers.
C)Both A and B
D)Neither A nor B

Question 12

Adjusting entries for accrued revenues and accrued expenses are similar in that:

A)They both involve cash flows after service.
B)They both involve cash flows before service.
C)They both debit temporary accounts.
D)They both credit temporary accounts.

Question 13

Which of the following most clearly differentiates accounting and bookkeeping?

A)Bookkeeping always involves information technology; accounting does not.
B)Accounting always involves information technology; bookkeeping does not.
C)Bookkeeping is the part of accounting most focused on rules and procedures.
D)A college degree is required for bookkeeping, but not for accounting.

Question 14

Which of the following sets includes examples of the same element of financial statements?

A)Accounts payable, deferred revenue, prepaid wages
B)Accounts receivable, deferred revenue, prepaid wages
C)Accounts payable, deferred revenue, wages payable
D)Deferred revenue, wages payable, prepaid wages

Question 15

In what way is the fifth step in the accounting cycle different from the seventh step in the accounting cycle?

A)The fifth step comes before preparing financial statements; the seventh step comes afterward.
B)The fifth step focuses only on permanent accounts; the seventh step focuses only on temporary accounts.
C)The fifth step focuses only on temporary accounts; the seventh step focuses only on permanent accounts.
D)The seventh step includes the results of internal transactions; the fifth step does not.

Question 16

The definition of accounting has three principal elements. Which of the following is not one of them?

A)Distinguishing relevant from irrelevant information
B)Calculating amounts to record in the AIS
C)Reporting financial results
D)Using the information to make informed judgments

Question 17

Which of the following statements about accounting and bookkeeping is most true?

A)The FASB Conceptual Framework is relevant in accounting, but not in bookkeeping.
B)The FASB Conceptual Framework is relevant in bookkeeping, but not in accounting.
C)As an element of the AIS, internal controls are irrelevant to bookkeeping.
D)As an element of the AIS, outputs are relevant to accounting.

Question 18

Please refer to the following unadjusted trial balance in answering the below question. 1) VLN had unpaid wages totaling $800 at the end of the accounting period. When VLN's accountant makes an adjusting entry for the unpaid wages, the new trial balance totals will be:

A)$49,600
B)$51,200
C)Some other amount
D)Cannot be determined from the information given

Question 19

The concept of bookkeeping includes: (i) distinguishing relevant from irrelevant information, (ii) calculating amounts to record in the AIS, (iii) reporting financial results.

A)I and II only.
B)I and III only.
C)II and III only.
D)I, II and III.

Question 20

Which of the following best pairs an element of bookkeeping with an example of the element?

A)Identifying economic information, reading a balance sheet
B)Identifying economic information, preparing a balance sheet
C)Measuring economic information, reading a balance sheet
D)Measuring economic information, preparing a balance sheet

Question 21

As a form of internal control, sequential numbering is most likely to be associated with which step in the accounting cycle?

A)First
B)Fifth
C)Sixth
D)Last

Question 22

TCP Corporation issues a purchase order whenever it buys inventory. Internal controls associated with the purchase order may include:

A)Sequential numbering
B)Transaction limits
C)Both A and B
D)Neither A nor B

Question 23

As an internal control for source documents, sequential numbering is most likely to ___ an error.

A)Prevent
B)Detect
C)Correct
D)Eliminate

Question 24

The accounting department at a local university uses the prefix ACC for all its courses, thus exemplifying which type of coding system?

A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Question 25

ABT Corporation uses block coding for its chart of accounts, which includes Cash (101), Land (201), Accounts payable (301) and Retained Earnings (501). Which of the following account numbers is most likely associated with an account that will appear on the adjusted trial balance but not on the post-closing trial balance?

A)203
B)405
C)504
D)701

Question 26

As a form of internal control, transaction limits are most likely to be associated with which step in the accounting cycle?

A)Second
B)Fourth
C)Ninth
D)Last

Question 27

Most organizations use purchase orders to authorize inventory and other purchases. If a company's purchase order contains a field labeled "purchase order number," it most likely uses what kind of coding?

A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Question 28

Just before preparing financial statements, an inexperienced accountant recorded the use of supplies by debiting supplies expense $100 and debiting supplies $100. Which of the following is most true?

A)The transaction was recorded correctly.
B)The unadjusted trial balance will be an effective internal control for detecting any error.
C)The adjusted trial balance will be an effective internal control for detecting any error.
D)Sequential transaction numbering will be an effective internal control for detecting any error.

Question 29

NTR Corporation has offices in both Los Angeles and San Francisco. In the Los Angeles office, the account number for cash is 001.101. In San Francisco, the account number for cash is 002.101. Which of the following statements is most true?

A)NTR uses sequential coding for its chart of accounts.
B)One of the offices should change its account number for cash to promote consistency and efficiency.
C)The first set of digits denotes the office.
D)The second set of digits denotes the office.

Question 30

Which type of coding system helps people remember the meaning of the code?

A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Question 31

As an internal control measure in the accounting cycle, physical security most clearly applies to:

A)Source documents
B)The balance sheet
C)The income statement
D)The statement of cash flows

Question 32

Most organizations use purchase orders to authorize inventory and other purchases. If a company's purchase order contains a column labeled "product code," it most likely uses what kind of coding?

A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Question 33

NTR Corporation has offices in both Los Angeles and San Francisco. In the Los Angeles office, the account number for cash is 001.101. In San Francisco, the account number for cash is 002.101. The account number for accounts receivable in the Los Angeles office is therefore likely to be:

A)001.102
B)002.102
C)102.002
D)002.110

Question 34

All of the following are common coding systems used in organizations except:

A)Block
B)Hierarchical
C)Random
D)Sequential

Question 35

Linda embezzled cash from her employer by forging a signature on a check. Which of the following internal controls for source documents would most likely prevent such occurrences in the future?

A)Sequential numbering
B)Physical security
C)Transaction limits
D)Bank reconciliation

Question 36

As an internal control for source documents, transaction limits are most likely to ___ an error.

A)Prevent
B)Detect
C)Correct
D)Eliminate

Question 37

Courses intended for freshmen at a local university are numbered from 100 to 199, while courses intended for seniors at the same university are numbered from 400 to 499. Which coding system is the university using?

A)Sequential
B)Block
C)Hierarchical
D)Mnemonic

Question 38

ABT Corporation uses block coding for its chart of accounts, which includes Cash (101), Land (201), Accounts payable (301) and Retained Earnings (501). Which of the following account numbers is most likely associated with an account that will appear on the income statement?

A)101
B)102
C)401
D)601

Question 39

Requiring ___ on certain source documents is associated with transaction limits as an internal control.

A)Sequential numbering
B)Physical security
C)Supervisory approval
D)Internal transaction notifications

Question 40

Common internal controls associated with source documents include: (i) sequential numbering, (ii) physical security, (iii) equality of debits and credits.

A)I and II only
B)I and III only
C)II and III only
D)I, II and III

Question 41

Human judgment is important in which of the following AIS tasks: (i) designing source documents, (ii) recognizing recordable transactions.

A)I only
B)II only
C)Both I and II
D)Neither I nor II

Question 42

Information technology:

A)Has replaced human judgment in accounting.
B)Has cut down on the tedium associated with many steps in the accounting cycle.
C)Is an essential element of any AIS.
D)Is the defining feature of the AIS.

Question 43

In an AIS, human judgment is important in:

A)The second step of the accounting cycle.
B)The design and implementation of internal controls.
C)Both A and B.
D)Neither A nor B.

Question 44

The text discussed common internal controls associated with the steps in the accounting cycle; it also discussed the role of human judgment and information technology in the cycle. Identify and describe:
A. One way human judgment can improve internal control in the accounting cycle.
B. One way information technology can improve internal control in the accounting cycle.
C. One way human judgment can create internal control challenges in the accounting cycle.
D. One way information technology can create internal control challenges in the accounting cycle.

Question 45

Which of the following statements about human judgment and information technology in the AIS is most true?

A)Information technology is a substitute for human judgment.
B)Human judgment is a substitute for information technology.
C)Information technology can enhance human judgment.
D)Both information technology and human judgment are essential in any AIS.

Question 46

Both human judgment and information technology are important in accounting information systems. In which of the following pairs of tasks will information technology be more critical than human judgment?

A)Steps 4 and 9 of the accounting cycle
B)Calculating depreciation and creating a new customer order form in Word
C)Step 4 of the accounting cycle and calculating depreciation
D)Step 9 of the accounting cycle and creating a new customer order form in Word

Question 47

Information technology can be an important tool in which of the five generic elements of an AIS?

A)Inputs and outputs only
B)Outputs and storage only
C)Processes and storage only
D)Any of the elements

Question 48

Which type of adjusting entry is most likely to involve human judgment?

A)Uncollectible accounts
B)Accrued liabilities
C)Deferred revenue
D)Prepaid expenses

Question 49

SBL Corporation's accounting records were destroyed in a fire. In reconstructing them:

A)Human judgment will be important, but information technology will not.
B)Information technology will be important, but human judgment will not.
C)Both human judgment and information technology may be important.
D)Neither human judgment nor information technology will be useful.

Question 50

As an internal control, RSR Corporation requires two signatures on all checks over $500, thus illustrating the importance of:

A)Human judgment.
B)Information technology.
C)Both human judgment and information technology.
D)Neither human judgment nor information technology.

Question 51

Accounting information systems have five generic parts, one of which is internal control. Please give two examples of applicable internal controls for each of the remaining parts of the AIS.1) Inputs
A. Example 1: _________________________________________________
b. Example 2: _________________________________________________
2) Processes
A. Example 1: _________________________________________________
b. Example 2: _________________________________________________
3) Outputs
A. Example 1: _________________________________________________
b. Example 2: _________________________________________________
4) Storage
A. Example 1: _________________________________________________
b. Example 2: _________________________________________________

Question 52

The American Accounting Association's definition of accounting includes the items listed on the right. Which item is most clearly related to the examples on the left? Some elements of the definition may be used more than once; others may not be used at all. Each item on the left has only one best answer.

Question 53

Explain, in your own words, two similarities and two differences between "accounting" and "bookkeeping."

Question 54

Consider the accounting-related tasks below: Divide the tasks into two groups of equal size.

Question 55

SRE Corporation is a software development company; it uses block coding in its chart of accounts. Which of the following statements is most true?

A)Information technology may not be necessary to assign new account numbers.
B)Human judgment may be involved in assigning new account numbers.
C)Both A and B
D)Neither A nor B

Question 56

List the steps in the accounting cycle in their proper order.

Question 57

Eric and Gloria were recently hired as entry-level accountants for RSP Corporation. They had the following conversation about their duties and responsibilities.Eric: I'm really excited to have this job; I've wanted to work in this industry for a couple years now. Gloria: I completed an internship with RSP last year, and I can tell you it's a terrific place to work. Eric: I wonder what kinds of things we'll be doing in our first few months. Gloria: Well, I can tell you some of the things I did during my internship. I helped input data for the corporate tax return in TaxEasy; I also developed initial estimates of bad debts based on an analysis of credit sales. And, I downloaded cost and budget information from the AIS so I could calculate cost variances. Eric: That's quite a diverse group of tasks for an intern! I was hoping to be able to work with RSP's internal audit department at some point; I hear they are the ones in charge of investigating potential fraud in the company. Gloria: Really? How do they know where fraud might exist? Eric: Well, the company has a dedicated phone line employees can call when they suspect fraud may be occurring; the internal auditors listen to those calls, then determine which cases they should investigate. Also, internal auditors analyze spending patterns throughout the company; if they see a sharp increase in spending, they investigate it further.Required: Analyze Eric and Gloria's conversation for tasks that require human judgment and/or information technology. List five examples of such tasks in the space provided below. For each task, indicate whether it involves human judgment, information technology or both.

Question 58

Put the following statements in the correct order based on the steps in the accounting cycle.
A. Assemble AIS outputs.
B. Debit cash and credit sales.
C. Determine the correct way to enter a transaction in the AIS.
D. Examine a bank statement to determine the amount of a bank service charge.
E. Make entries that account for timing differences between cash flows and accrual basis revenue and expense.
F. Prepare the AIS for a new fiscal year.
G. Reorganize AIS information from chronological to account-based.
H. Verify, for the first time, the equality of debits and credits in the ledger.
I. Verify, for the second time, the equality of debits and credits in the ledger.j. Verify, for the third time, the equality of debits and credits in the ledger.

Question 59

The text discussed four common coding systems for AIS documents, charts of accounts and other applications. It also discussed a few common internal controls associated with the steps in the accounting cycle. Can the use of block or hierarchical coding in the chart of accounts be considered a form of internal control? Justify your response.