Deck 13: Transaction Cycle The General Ledger and Financial Reporting Cycle

Question 1

It is often necessary to create one-off reports from data held in the general ledger.Which of the following technologies would be useful for an end user to analyse extracted data and format a report?

A)Crystal Reports
B)Microsoft Excel
C)Microsoft PowerPoint
D)SAP Business Intelligence Solutions

Answer 1

A

Question 2

During the general ledger and financial reporting cycle:

A)Budgets are created and agreed upon.
B)Transactional level data is accumulated,summarised,adjusted and reported to internal users.
C)Transactional level data is accumulated,summarised,adjusted and reported to external users.
D)All of the options are correct.

Answer 2

D

Question 3

Which is the most likely cause of a large variance between budget estimates and actual results if the company is well managed with efficient internal controls?

A)Production is working inefficiently and using too much raw material
B)The budget is unrealistic and cannot be met
C)Inaccurate data has been recorded
D)Raw materials are being stolen

Answer 3

A

Question 4

Which of the following is not a problem that can be caused directly by errors in financial statements?

A)Inability to improve business process efficiencies
B)Inability to access capital markets
C)Inequitable increases in the cost of capital
D)Incorrect market pricing of company shares

Question 5

The general ledger and financial reporting cycle commences when:

A)data are received from other cycles
B)budgets are created
C)it is time to generate and distribute financial reports
D)budget variances are examined

Question 6

Which of the following statements regarding operational reports is true?

A)Any operational report that is based on accrual accounting assumptions can only be relied upon if it is generated using correctly adjusted data.
B)Operational reports can be generated at any time after a transaction is recorded
C)Operational reports usually extract and report data directly from summarised general ledgers.
D)Operational reports are constructed in accordance with the requirements of the relevant accounting standards and they are freely available to both external and internal users.

Question 7

Vendor invoices from the expenditure cycle flow into the general ledger and financial reporting cycle through:

A)the purchases journal directly
B)the purchases journal and then through the accounts payable subsidiary ledger
C)the cash disbursements journal directly
D)the accounts payable subsidiary ledger and then through the cash disbursements journal

Question 8

Financial reports generated in the general ledger and financial reporting cycle is used by:

A)Managers within the organisation
B)Investors
C)External regulators
D)All of the options are correct.

Question 9

The main objective of the general ledger and financial reporting cycle is to:

A)Create a trial balance of various accounts as well as adjusted trial balances.
B)Perform bank reconciliation to verify independently the balances of the cash-based general ledger accounts.
C)Synthesise and report data that accurately represents business transactions and activities
D)All of the options are correct.

Question 10

The general ledger and financial reporting cycle ends when:

A)no more data are received from other cycles
B)budgets are created
C)financial reports have been generated and distributed
D)budget variances are examined

Question 11

High-quality decision-making requires:

A)valid,timely,accurate,and complete data and comprehensible reports
B)valid,timely,accurate,and complete data and comprehensive reports
C)good data and comprehensive reports
D)comprehensive data and comprehensible reports

Question 12

Which of the following statements regarding reports is true?

A)Reports should contain as many data as possible so that readers are able to understand the reports thoroughly.
B)Poorly arranged data in reports can be misleading.
C)Simple issues such as selecting the appropriate font size or column heading are unlikely to impact on the understandability of a report.
D)All of the options are correct.

Question 13

An unfavourable variance between budgeted and actual data may indicate:

A)Poor performance.
B)Budget estimates were set at an unrealistic or unachievable level.
C)The estimation of future activity levels and the associated potential costs and revenues is incorrect and inaccurate.
D)All of the options are correct.

Question 14

Which of the following technologies can be used in the general ledger and financial reporting cycle?

A)ERP and XBRL
B)ERP and CAD
C)RFID and XBRL
D)CAD and RFID

Question 15

Which of the following documents (or information on these documents)does not flow into the general ledger and financial reporting cycle through the cash disbursements journal?

A)Production costs
B)Payroll
C)Cheques
D)Purchase invoice

Question 16

Which of the following statements regarding reports is true?

A)Financial reports are more detailed than management reports.
B)Financial reports have an internal focus.
C)Management reports can be distributed externally.
D)Basic reports contain even more detailed information than financial reports and management reports.

Question 17

The general ledger and financial reporting cycle ________.

A)Summarises,adjusts,and reports on data from all previous operational cycles.
B)Summarises,adjusts,and reports on data from all current operational cycles.
C)Creates,adjusts,and summarises on data from all previous operational cycles.
D)Creates,adjusts,and summarises on data from all current operational cycles.

Question 18

The purpose of budgeting is to:

A)Get a forecast of resource usage of the next financial year only.
B)Facilitate organisational planning and control.
C)Request more funding.
D)All of the options are correct.

Question 19

In terms of the general ledger and financial reporting cycle,which of the following sequences is in the correct order?

A)create trial balance,perform bank reconciliation,prepare adjusting journal entries,conduct financial reporting
B)prepare adjusting journal entries,create trial balance,perform bank reconciliation,conduct financial reporting
C)perform bank reconciliation,create trial balance,prepare adjusting journal entries,conduct financial reporting
D)create trial balance,prepare adjusting journal entries,perform bank reconciliation,conduct financial reporting

Question 20

In the general ledger and financial reporting cycle:

A)Adjusting journal entries does not have to be authorised independently.
B)Reports must not contain irrelevant data.
C)Data should not be transferred amongst accounts.
D)Data need not be validated.

Question 21

The general ledger and financial reporting cycle initially extracts existing transactional data from:

A)Previous financial reports.
B)Operational reports.
C)Online banking facilities.
D)Subsidiary ledgers.

Question 22

Which of the following must be taken into consideration before a general journal adjustment is authorised?

A)The need to incorporate data from external sources such as bank statements
B)Accounting policies and procedures
C)Accounting standards
D)All of the options are correct

Question 23

Which of the following regarding the setting of budget targets is true?

A)When setting budget targets,more emphasis should be put on what is desired in terms of performance.
B)When setting budget targets,more emphasis should be put on what is thought to be possible.
C)When setting budget targets,there should be a balance between what is desired in terms of performance and what is thought to be possible
D)When setting budget targets,neither what is desired in terms of performance nor what is thought to be possible should be considered.

Question 24

Transactional data is summarised by account code in the general ledger.The codes are then used in the reporting structure.What is the name given to the list of available codes?

A)List of account codes
B)Chart of accounts
C)Table of accounts
D)Reporting account codes

Question 25

An internet-based banking facility that allows organisations to manage and view their bank accounts online and conduct transactions such as transfers from those accounts is called:

A)Online reconciliation
B)Online payment
C)Online banking
D)Online financial management

Question 26

Typical budget decisions do not include:

A)budget variance
B)budget level
C)budget breakdown
D)budget targets

Question 27

Which of the following statements regarding the finalisation of budgets is true?

A)The finalisation of budges is a nondiscretionary process involving senior management only.
B)The finalisation of budgets is an interactive process involving both senior management and operational staff.
C)The finalisation of budgets is a nondiscretionary process involving both senior management and operational staff.
D)The finalisation of budgets is an interactive process involving both senior management and middle management.

Question 28

Common reports produced in the general ledger and financial reporting cycle include:

A)Profitability analysis for the organisation or a division
B)Cost management analysis for decision-making.
C)Analysis of profitability potential to guide future investment decisions
D)All of the options are correct.

Question 29

Which of the following reports is not produced by the general ledger and financial reporting cycle to support decision makers within the organisation?

A)Profitability analysis for the organisation
B)Cost management analysis
C)Variance analysis for a division
D)Aged accounts analysis

Question 30

Decisions relating to general journal entries would include consideration of:

A)accounting standards,policies,and procedures
B)timing differences for a given accounting period
C)the need to incorporate data from external sources
D)All of the options are correct.

Question 31

Which of the following statements regarding budgets is true?

A)More aggregate budgets are more difficult to plan.
B)More aggregate budgets have sound usefulness during monitoring of performance due to the abundance of information they provide.
C)Budgets can be set at two levels.
D)Budgets can be set for each different type of revenue and expense for each division as contained in the chart of accounts.

Question 32

Who uses the data produced by the general ledger and financial reporting cycle?

A)All levels of management
B)Investors and analysts
C)Regulatory bodies
D)All of the options are correct

Question 33

XBRL allows semantics to be embedded within strings of financial data.This does not mean:

A)It is easier to build a database for accounting information systems
B)More in-depth analysis can be conducted by users or recipients of the data
C)Embedded tags that identify where separate pieces of data start and end within strings of data is inserted
D)It is easier to exchange financial data.

Question 34

Online banking is unlikely to be helpful:

A)in terms of being able to monitor cash transactions more easily.
B)in terms of being able to reconcile cash transactions more easily.
C)for organisations that wish to automate bank reconciliations.
D)in terms of allowing more in-depth analysis to be conducted by users or recipients of the data

Question 35

Adoption of any alternative costing or reporting requirements,such as activity based costing,will:

A)not affect the number of tags needed to code transactions accurately into the general ledger accounts
B)decrease the number of tags needed to code transactions accurately into the general ledger accounts
C)increase the number of tags needed to code transactions accurately into the general ledger accounts
D)increase or decrease the number of tags needed to code transactions accurately into the general ledger accounts,depending on the actual costing method or reporting requirement adopted

Question 36

Which of the following controls can be applied to minimise the risk of under or over estimating revenue and expenditure amounts?

A)Independent approval of budget estimates
B)Ask operational managers to prepare budget estimates
C)Link budget values to performance monitoring
D)All of the options are correct.

Question 37

The degree of granularity of a budget refers to which of the following:

A)Budgeting by line item rather than in aggregate
B)Producing an annual budget or month by month
C)The amount of stretch built into the budget
D)Which level of management were involved in the estimates

Question 38

Which of the following is not required during the process of updating the general ledger?

A)journal voucher
B)accounts receivable data
C)manufacturing overheads
D)direct labour costs

Question 39

Setting budget targets requires a balance between:

A)the current financial situation of the organisation and the forecasted cash flow
B)what is desired in terms of performance and what is thought to be possible
C)the expenditure and the revenue of the organisation
D)All of the options are correct.

Question 40

A well-designed chart of accounts will:

A)support key reporting requirements while minimising or even eliminating data entry error
B)support diverse reporting requirements while maintaining an acceptably low data entry error rate
C)contain more digits in general ledger account number
D)not include an indicator for every possible dimension that the transaction may conceivably need to be reported on

Question 41

Describe how chart of accounts are used during the general ledger and financial reporting cycle.

Question 42

Why budgets are created and how budgets are used to assess performance?

Question 43

What are the key considerations when setting budget targets?

Question 44

What are the strategic implications of the general ledger and financial reporting cycle?

Question 45

What are the typical risks encountered during the production of management reports and what are the relevant common controls?

Question 46

Which of the following is not helpful in reducing the risk of journal entries errors during the preparation of adjusting journals?

A)Independent approval of journal entries by senior accounting staff
B)Attach full working papers to support journal entry calculations
C)Document assumptions and algorithms relied on when calculating journal amounts
D)Performing a reasonableness check.

Question 47

Process performance should be measured relative to:

A)how cost-effective the process is
B)how efficient the process is
C)how well the process fits the overall business strategy
D)how well the process outcomes achieve the overall objectives of a relevant cycle

Question 48

Describe the difference between financial statements and management reports.

Question 49

To reduce the risks of incomplete and inaccurate data during data extraction and validation in the process of updating general ledger,which of the following controls can be used?

A)Batch totals
B)Hash totals
C)Use ledger control accounts
D)All of the options are correct.

Question 50

The main risk attached to producing financial reports is:

A)unauthorised distribution of financial reports
B)unauthorised access of financial reports
C)reporting incorrect data
D)reporting too many data

Question 51

Give examples of different budget levels and explain any deficiencies that may associate with these levels.

Question 52

Which of the following is NOT a KPI that can be used to measure the objective "To accurately and completely determine and record budget estimates"?

A)The time between budget creation and budget approval
B)Number of budget variances reported
C)Cycle time to create budgets
D)Operational manager complaints received regarding budget errors

Question 53

What are the considerations when planning budget breakdown?

Question 54

Give at least three example KPIs to measure the objective "To ensure all adjusting journal entries are accurately prepared and independently authorised"

Question 55

What are the common controls for controlling errors in journal entries during the preparation of adjustment journals?

Question 56

Unauthorised distribution of financial data cannot be controlled by:

A)using the XBRL technology
B)applying secure privacy settings on electronic reports
C)using a document management system for reports containing sensitive data
D)maintaining security profiles allowing read-only access to financial data at the individual level

Question 57

Which of the following is NOT a KPI that can be used to measure the objective "To validate and correctly transfer all relevant transactional data"?

A)Number of data errors detected
B)The volume of transactional data transferred
C)Reconciled balances in subsidiary ledger control accounts
D)Number of un-cleared transactions in suspense accounts

Question 58

A warning message is produced if budget estimate varies by more than a fixed percentage from last year's budget is an example of controlling for:

A)Fraud
B)Data entry errors when recording budgets
C)Underestimation of revenue and expenditure amounts
D)All of the options are correct

Question 59

Which of the following is NOT a KPI that can be used to measure the objective "To ensure all adjusting journal entries are accurately prepared and independently authorised"?

A)Number of erroneous adjustments detected
B)Level of unadjusted balances in asset and liability accounts
C)The number of authorisation performed
D)Degree of compliance with accounting policy

Question 60

Which of the following is NOT a KPI that can be used to measure the objective "To ensure all reports generated are well designed and contain relevant and accurate data"?

A)Number of complaints received from report users
B)Number of data errors identified in reports
C)Number of positive remarks received from report users
D)Number of sophisticated data tables in reports