Deck 12: Administrative Processes and Controls

Question 1

Within the administrative processes, systems and controls result from transactions that are:

A)Large volumes of daily materials transactions.
B)Large volumes of daily sales and cash inflow transactions.
C)Periodic.
D)Infrequent or intermittent.

Answer 1

C
Periodic.

Question 2

In a manual system with proper segregation of duties, an employee in the general ledger department should only

A)Authorize posting to the general ledger.
B)Post transactions to the general ledger.
C)Reconcile the subsidiary ledger to the general ledger.
D)Post transactions to the subsidiary ledger.

Answer 2

B
Post transactions to the general ledger.

Question 3

Payroll transactions are considered:

A)Large volume daily events.
B)Small volume daily events.
C)Periodic events.
D)Intermittent or infrequent events.

Answer 3

C
Periodic events.

Question 4

Which of the following statements is NOT true regarding source of capital transactions?

A)These processes should not be initiated unless there is specific authorization by management at a top level.
B)Source of capital processes will result in potential dividend or interest payments.
C)Retirement of debt is a source of capital process.
D)The fact that these transactions and processes cannot occur without oversight by top management means other controls are not necessary.

Question 5

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.

Question 6

Regarding subsidiary ledgers and general ledger control accounts, which of the following is NOT true?

A)Total balances in a subsidiary ledger should always equal the balance in the corresponding general ledger account.
B)The general ledger maintains details of subaccounts.
C)Control is enhanced by separating the subsidiary ledger from the general ledger.
D)Reconciling a subsidiary ledger to the general ledger can help to detect errors or fraud.

Question 7

Which of the following is NOT generally an area of measure in a balanced scorecard?

A)Vendor
B)Customer
C)Financial
D)Learning and growth
TEST BANK - CHAPTER 12 - MULTIPLE CHOICE

Question 8

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.

Question 9

Within the conversion processes, systems and controls result from transactions that are:

A)Large volumes of daily materials transactions.
B)Large volumes of daily sales and cash inflow transactions.
C)Periodic.
D)Infrequent.

Question 10

Which of the following is NOT part of an administrative process?

A)The sale of stock
B)The sale of bonds
C)The write-off of bad debts
D)The purchase of marketable securities

Question 11

Within the revenue and return processes, systems and controls result from transactions that are:

A)Large volumes of daily materials transactions.
B)Large volumes of daily sales and cash inflow transactions.
C)Periodic.
D)Infrequent.

Question 12

Which of the following statements is true regarding internal controls of capital and investment processes?

A)Internal controls aimed at preventing and detecting employee fraud in capital and investment processes are not as effective.
B)Top management fraud, rather than employee fraud, is more likely to occur.
C)Any fraud is likely to involve manipulating capital and investment processes.
D)Because of top management oversight, the auditor need not review these processes.

Question 13

External reports do not include:

A)Balance sheets.
B)Income statements.
C)Sales reports.
D)Cash flows.

Question 14

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.

Question 15

Which of the following statements is true?

A)Routine transactions are recorded in the general journal.
B)Nonroutine transactions are entered in the general journal.
C)Nonroutine transactions are recorded in a subsidiary ledger.
D)Nonroutine transactions are recorded in a special journal.

Question 16

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.

Question 17

Which of the following statements regarding the authorization of general ledger posting is NOT true?

A)Posting to the general ledger always requires specific authorization.
B)User IDs and passwords can serve as authorization to post transactions to the general ledger.
C)A journal voucher serves as authorization for manual systems.
D)As IT systems become more automated, the authorization of general ledger posting is moved to lower levels of employees.

Question 18

Internal reports do not include:

A)Balance sheets.
B)Sales reports.
C)Cash flows.
D)Inventory status reports.

Question 19

Which of the following statements about reporting is true?

A)External users need detailed, rather than summarized, information.
B)All reports, internal and external, are derived only from general ledger data.
C)All organizations need similar internal reports.
D)Internal reports are tailored to the specific needs of each management level and function.

Question 20

The officer within a corporation that usually has oversight responsibility for investment processes is the

A)Controller.
B)Treasurer.
C)Chief executive officer CEO).
D)Chief accounting officer CAO).

Question 21

Long-term debt results from borrowing funds via:

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.

Question 22

Investment processes:

A)Issue stock.
B)Issue bonds.
C)Purchase of fixed assets.
D)Invest excess funds.

Question 23

The ________ provides) details for all the account within the chart of accounts and is the entire set of T-accounts for the organization.

A)Trial balance
B)Adjust entries
C)Financial statements
D)General ledger

Question 24

Items associated with debt do NOT include:

A)Interest.
B)Maturity date.
C)Dividends.
D)Changes in stockholders' equity.

Question 25

The processes that authorize the raising of capital, execute the raising of capital, and properly account for that capital are called:

A)Capital raising processes
B)Source of capital processes
C)Administrative processes
D)Investment processes

Question 26

Which of the following is NOT a special journal?

A)Sales journal
B)Inventory journal.
C)Cash receipts journal.
D)Payroll journal.

Question 27

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.

Question 28

Which of the following, within the corporation, has the responsibility for making investment decisions?

A)Board of directors.
B)Chief financial officer.
C)Treasurer.
D)President/CEO.

Question 29

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.

Question 30

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.

Question 31

The proper sequence of events for the accounting cycle is:

A)Journalize, post, trial balance, adjusting entries, financial statements, and closing entries.
B)Journalize, post, trial balance, adjusting entries, closing entries, and financial statements.
C)Journalize, post, adjusting entries, trial balance, closing entries, and financial statements.
D)Trial balance, adjusting entries, journalize, post, closing entries, and financial statements.

Question 32

Raw material events can be found in which two processes?

A)Revenue and return processes, systems & controls and 2) expenditures and return processes, systems & controls.
B)Expenditures and return processes, systems & controls and 2) conversion processes, systems & controls.
C)Conversion processes, systems & controls and 2) Administrative processes, systems & controls.
D)Administrative processes, systems & controls and 2) Revenue and return processes, systems & controls.

Question 33

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.

Question 34

Capital funds are acquired through the issuance of:

A)Bonds only.
B)Stocks and/or bonds.
C)Stocks only.
D)Debt instruments only.

Question 35

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.

Question 36

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.

Question 37

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.

Question 38

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 approval.
C)Both the capital process and the investment process require top management approval.
D)Neither the capital process nor the investment processes require top management approval.

Question 39

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.

Question 40

Items associated with equity include all but:

A)Interest.
B)Maturity date.
C)Dividends.
D)Changes in stockholders' equity.

Question 41

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.

Question 42

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.

Question 43

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.

Question 44

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.

Question 45

In the case of a manual accounting system, wages and payroll deductions would not be posted to the general ledger until the ________ forwards a signed journal voucher, giving the authorization.

A)Accounting manager
B)Controller
C)Payroll department
D)Upper management

Question 46

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.

Question 47

When a transaction occurs in a business, the accountant must decide if it is a regular and recurring transaction.If the transaction IS regular and recurring, it will be recorded in a ____1_____.If it is NOT regular and recurring, it will be recorded in a _____2_____.

A)1=General journal; 2=Special journal
B)1=General ledger: 2=Special ledger
C)1=Special journal; 2=General Journal
D)1=Special journal; 2=Subsidiary Ledger

Question 48

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.

Question 49

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.

Question 50

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.

Question 51

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 subsidiary ledger for inventory.
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.

Question 52

Special journals include the:

A)Accounts receivable journal.
B)Accounts payable journal.
C)Purchases journal.
D)Inventory journal.

Question 53

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.

Question 54

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.

Question 55

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.

Question 56

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.

Question 57

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.

Question 58

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.

Question 59

The sales journal would have columns for a:

A)Debit to sales, a credit to accounts receivable.
B)Debit to cash, a debit to accounts receivable, and a credit to sales.
C)Debit to accounts receivable and a credit to cost of goods sold.
D)Debit to accounts receivable and a credit to sales.

Question 60

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.

Question 61

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.

Question 62

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.

Question 63

IT controls over computer records and physical controls in general ledger storage areas minimize the related risk of:

A)Fraud and errors
B)Invalid general ledger postings
C)Theft and fraud
D)Amounts posted to wrong accounts

Question 64

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.

Question 65

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.

Question 66

The account that a manufacturing operation and a retail firm would have in common would be:

A)Raw materials.
B)Work in process.
C)Manufacturing Labor.
D)Inventory.

Question 67

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)The user can select which batches of transactions to post.
D)Anyone with general ledger access can post the transactions.

Question 68

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

A)Inventory.
B)Revenues.
C)
C)Profitability.
D)Both B and

Question 69

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.

Question 70

Financial statements:

A)Are generated from the values of the special journals and subsidiary ledgers.
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.

Question 71

By maintaining a well-defined, complete chart of accounts, an organization minimizes the related risk of:

A)Fraud and errors
B)Invalid general ledger postings
C)Theft and fraud
D)Amounts posted to wrong accounts

Question 72

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.

Question 73

Audit trails:

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.

Question 74

Which of the following statements is FALSE?

A)As computerized accounting systems become more complex, there are usually fewer manual processes.
B)With more automation in computerized accounting systems, responsibility for authorization gets moved to lower levels of employees.
C)Approvals for each journal voucher are general authorizations instead of a specific authorization.
D)None of the above are false.

Question 75

The four general purpose financial statements are:

A)Generated at the end of each month.
B)Generated at the end of each fiscal period.
C)Distributed only to external users.
D)Distributed only to internal users.

Question 76

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.

Question 77

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.

Question 78

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.

Question 79

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.

Question 80

Select the true statement from those listed below.

A)Managers only need reports showing dollar values.
B)Managers only need reports showing unit data.
C)All managers need the same information.
D)Managers need the information associated with their area of responsibility.