Deck 8: The Financial Process

Question 1

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

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

Answer 1

B

Question 2

Which of the following is an example of vertical analysis?

A) Data comparisons
B) Absolute changes
C) Common dollar analysis
D) Percentage changes

Answer 2

C

Question 3

Which module composes the financial process in AIS software packages?

A) The customer module
B) The vendor module
C) The general ledger module
D) The inventory module

Answer 3

C

Question 4

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

Question 5

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

A) Normal account
B) Statistical account
C) Sub-account
D) Master account

Question 6

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

A) Master accounts
B) Modules
C) Sub-accounts
D) Normal accounts

Question 7

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

A) Normal accounts
B) Master accounts
C) Sub-accounts
D) Statistical accounts

Question 8

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) Pencil posting
C) Ink posting
D) Both A and B

Question 9

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

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

Question 10

Which of the following are efficiency features in data entry?

A) Recurring entries
B) Automatic distribution entry
C) Auto-enter
D) All of the above are efficiency features in data entry.

Question 11

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

A) Payment of a lawsuit settlement of $5 million
B) Payroll
C) Purchases from vendors
D) Sales to customers

Question 12

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

A) Common dollar analysis
B) Data comparisons
C) Absolute changes
D) Percentage changes

Question 13

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

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

Question 14

What is the core activity of an accounting information system?

A) The revenue process
B) The purchasing process
C) The financial process
D) The transaction process

Question 15

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

A) Normal accounts
B) Chart of accounts
C) Sub-accounts
D) Master accounts

Question 16

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

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

Question 17

The financial process encompasses which of the following activities?

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

Question 18

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

A) Statement of owners' equity, statement of cash flow, and balance sheet
B) Balance sheet, income statement, and statement of cash flow
C) Income statement, statement of cash flow, and statement of owners' equity
D) Balance sheet, statement of owners' equity, and income statement

Question 19

What types of entries are recorded in the financial process?

A) Data captured in and transferred from other processes
B) Reversing entries
C) End-of-period adjustments
D) All of the above are types of entries recorded in the financial process.

Question 20

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

A) Module
B) Chart of accounts
C) Inactive account
D) Master account

Question 21

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

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

Question 22

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

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

Question 23

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

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

Question 24

Closings for interim periods are known as hard closings.

Question 25

When an account is designated as "inactive," which of the following is NOT true of its status?

A) The accounting system will prevent further entries from being made to the account.
B) The accounting system will immediately delete the account from the chart of accounts.
C) The account remains active until the accounting period is closed and financial statements issued.
D) All of the above are false regarding inactive accounts.

Question 26

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?

A) Cost accounting
B) Payment of stock dividends
C) Accounts receivable
D) Cash receipts

Question 27

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

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

Question 28

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

Question 29

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 the above are included in the financial process.

Question 30

Accounting information system software packages are usually composed of modules, with one or more modules composing a part of related accounting information system processes.

Question 31

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

A) Transactions approved/created by unauthorized persons.
B) Transactions for unauthorized amounts.
C) Adjusting entries approved/created by unauthorized persons.
D) All of the above.

Question 32

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

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

Question 33

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

A) Revenue process
B) Inventory process
C) Financial process
D) Purchasing process

Question 34

The financial process is the core activity of the accounting information system.

Question 35

The balance sheet and statement of cash flow constitute the basic reporting requirements in the financial process.

Question 36

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?

A) Payment of bond interest
B) Issuance of bonds
C) Vendor invoicing
D) Issuance of stocks

Question 37

Mainframe and minicomputer based accounting packages, being designed for large transaction volumes, almost universally support the dollar-entry method for entering monetary values.

Question 38

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

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

Question 39

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

A) Inventory management
B) Sales order processing
C) Budget preparation
D) Vendor invoicing

Question 40

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

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

Question 41

The chart of accounts is the listing of account names stored in the financial process along with codes assigned to the accounts.

Question 42

Generally speaking, transactions that are categorized as sales, purchases, cash payments, cash receipts, or payroll are initially recorded in the general ledger module.

Question 43

What types of business processes are first reflected in the general ledger module?

Question 44

The chart of accounts that is a listing of all account names, along with their numbers and codes assigned to the accounts (general ledger).

Question 45

In an accounting information system software package, is the ability to enter out- of-balance entries a defect or a benefit? Discuss your position.

Question 46

The most significant conceptual difference between manual and computerized accounting systems is that in the computerized financial process, the vast majority of transactions are first recorded in other processes and then transferred to the financial process.

Question 47

The internal audit department chooses the external auditor.

Question 48

List three types of ratios that place information in a context so that relationships may be judged.

Question 49

The first field of an account identifier begins with a sequence code.

Question 50

List the types of entries recorded in the financial process.

Question 51

The transfer of data to the general ledger module from other modules can be made in summary or in detail.

Question 52

Recurring entry is a feature that automates the process of recording transactions and adjustments that are encountered repeatedly.

Question 53

Accounting information system software packages use the term "normal accounts" for the equivalent subsidiary ledger conventionally used in accounting.

Question 54

An inactive account should be immediately removed from the general ledger for security reasons.

Question 55

Horizontal analysis of financial statements is the presentation of each item as a percentage of some base amount.

Question 56

A transaction processing risk found in the financial process includes the processing of unauthorized transactions.

Question 57

Provisional posting can be used whether the accounting system uses real-time or batch posting.

Question 58

Vertical analysis of financial statements is the presentation of data comparisons, absolute changes, and percentage changes.

Question 59

FOB Destination means that title to the goods being shipped transfers to the customer when the items reach the customer's receiving dock.

Question 60

An account that stores the cubic feet of gas sold is an example of a statistical account.

Question 61

Describe inactive accounts and explain why it is important to retain inactive accounts in the general ledger.

Question 62

Describe some of the differences between GAAP and IFRS.

Question 63

List and explain four examples (out of the ten listed in the text) of transaction risk in the financial process.

Question 64

Define the following: chart of accounts, credit rating, FOB point, picking list.

Question 65

List and explain three examples of information processing control activities in the financial process.

Question 66

What are the three types of transactions recorded in the financial process?

Question 67

Define "soft" and "hard" closings. Be sure to indicate the DIFFERENCE between the two.

Question 68

Explain the difference in master accounts, sub-accounts, and normal accounts.

Question 69

Why is the time-sensitive entries feature useful?