Deck 6: The Expenditure Cycle Part Ii: Payroll Processing and Fixed Asset Procedures

Question 1

The supervisor is the best person to determine the existence of a "phantom employee" and should distribute paychecks.

Answer 1

False

Question 2

Fixed asset accounting systems include cost allocation and matching procedures that are not part of routine expenditure systems.

Answer 2

True

Question 3

Accounting conventions and IRS rules sometime specify the depreciation parameters to be used.

Answer 3

True

Question 4

Fixed Asset Systems must keep track of the physical location of each asset to promote accountability.

Question 5

Asset maintenance involves only the recording of depreciation charges.Physical improvements are always expensed.

Question 6

Time cards capture the total time an individual worker spends on each production job.

Question 7

Employee paychecks should be drawn against a special checking account.

Question 8

The fixed asset disposal report authorizes the user department to dispose of a fixed asset.

Question 9

Work-in-process records are updated by payroll personnel.

Question 10

Inventory control performs the formal record keeping function for fixed assets.

Question 11

Time cards are used by cost accounting to allocate direct labor charges to work in process.

Question 12

Ideally,payroll checks are written on a special bank account used only for payroll.

Question 13

Authorization to dispose of fixed assets should be issued by the user of the asset.

Question 14

Most payroll systems for mid-size firms use real-time data processing.

Question 15

The depreciation schedule shows when assets are fully depreciated.

Question 16

The personnel department authorizes changes in employee pay rates.

Question 17

To improve internal control,paychecks should be distributed by the employee's supervisor.

Question 18

Payroll processing can be automated easily because accounting for payroll is very simple.

Question 19

Timekeeping is part of the personnel function.

Question 20

Because a time clock is used,no supervision is required when employees enter and leave the work place.

Question 21

Inventory control authorizes fixed asset purchases with a purchase requisition.

Question 22

Where does the responsibility lie for reconciling the labor distribution summary and the payroll disbursement voucher?

A) cash disbursements
B) cost accounting
C) personnel
D) general ledger

Question 23

Which department is responsible for approving changes in pay rates for employees?

A) payroll
B) treasurer
C) personnel
D) cash disbursements

Question 24

The payroll department is responsible for both updating the employee records and writing paychecks.

Question 25

Which of the following is not a characteristic of the Fixed Asset System?

A) Acquisitions are routine transactions requiring general authorization.
B) Retirements are reported on an authorized disposal report form.
C) Acquisition cost is allocated over the expected life of the asset.
D) Transfer of fixed assets among departments is recorded in the fixed asset subsidiary ledger.

Question 26

Depreciation records include all of the following information about fixed assets except

A) the economic benefit of purchasing the asset
B) the cost of the asset
C) the depreciation method being used
D) the location of the asset

Question 27

Depreciation

A) is calculated by the department that uses the fixed asset
B) allocates the cost of the asset over its useful life
C) is recorded weekly
D) results in book value approximating fair market value

Question 28

Which internal control is not an important part of the payroll system?

A) Supervisors verify the accuracy of employee time cards.
B) Paychecks are distributed by an independent paymaster.
C) Accounts payable verifies the accuracy of the payroll register before transferring payroll funds to the general checking accounting.
D) General ledger reconciles the labor distribution summary and the payroll disbursement voucher.

Question 29

In a manufacturing firm,employees use time cards and job tickets.Which of the following statements is not correct?

A) Job tickets are prepared by employees for each job worked on,so an employee may have more that one job ticket on a given day.
B) An individual employee will have only one time card.
C) The time reported on job tickets should reconcile with the time reported on time cards.
D) Paychecks should be prepared from the job tickets.

Question 30

Which of the following statements is not true?

A) Routine payroll processing begins with the submission of time cards.
B) Payroll clerks must verify the hours reported on the time cards.
C) Payroll reconciles personnel action forms with time cards and prepares paychecks.
D) Cash disbursements signs paychecks and forwards them to the paymaster for distribution.

Question 31

Which control is not a part of the Fixed Asset System?

A) formal analysis of the purchase request
B) review of the assumptions used in the capital budgeting model
C) development of an economic order quantity model
D) estimates of anticipated cost savings

Question 32

In the payroll subsystem,which function should distribute paychecks?

A) personnel
B) timekeeping
C) paymaster
D) payroll

Question 33

Which transaction is not processed in the Fixed Asset System?

A) purchase of building
B) improvement of equipment
C) purchase of raw materials
D) sale of company van

Question 34

An important reconciliation in the payroll system is

A) general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable
B) personnel compares the number of employees authorized to receive a paycheck to the number of paychecks prepared
C) production compares the number of hours reported on job tickets to the number of hours reported on time cards
D) payroll compares the labor distribution summary to the hours reported on time cards

Question 35

The document that captures the total amount of time that individual workers spend on each production job is called a

A) time card
B) job ticket
C) personnel action form
D) labor distribution form

Question 36

The paymaster distributes paychecks to work center supervisors.

Question 37

When fixed assets are received,the receiving clerk sends copies of the receiving report to the inventory control clerk and the AP clerk.

Question 38

Work centers provide the personnel action form,which triggers the payroll process.

Question 39

Which of the following situations represents a serious control weakness?

A) Timekeeping is independent of the payroll department.
B) Paychecks are distributed by the employees' immediate supervisor.
C) Time cards are reconciled with job tickets.
D) Personnel is responsible for updating employee records,including creation of records for new hires.

Question 40

Objectives of the Fixed Asset System do not include

A) authorizing the acquisition of fixed assets
B) recording depreciation expense
C) computing gain and/or loss on disposal of fixed assets
D) maintaining a record of the fair market value of all fixed assets

Question 41

A control technique that can reduce the risk of a terminated employee being paid is

A) a security camera viewing the time clock
B) the supervisor taking role during the shift
C) paychecks being distributed by an independent paymaster
D) reconciliation of time cards and job tickets

Question 42

Personnel action forms are used to do all of the following except

A) activate new employees
B) terminate employees
C) record hours worked
D) change pay rates

Question 43

Accounts payable

A) signs paychecks
B) prepares the payroll voucher
C) reconciles time cards and employee records
D) distributes paychecks to employees

Question 44

Payroll checks are typically drawn on

A) the regular checking account
B) a payroll imprest account
C) a wages payable account
D) petty cash

Question 45

All of the following are processed by the Fixed Asset System except

A) sale of unneeded equipment
B) purchase of raw materials
C) repair of production equipment
D) purchase of a new plant

Question 46

Asset disposal

A) occurs as soon as an asset is fully depreciated
B) requires no special authorization
C) automatically initiates the purchase of a replacement asset
D) must follow formal authorization procedures

Question 47

The Fixed Asset Systems does all of the following except

A) records acquisition of assets
B) records improvements to assets
C) estimates the fair market value of assets in service
D) records the disposal of assets

Question 48

The Fixed Asset System performs all of the following except

A) determines the need for new assets
B) maintains depreciation records
C) records retirement and disposal of assets
D) tracks the physical location of fixed assets

Question 49

Accounting records that provide the audit trail for payroll include all of the following except

A) time cards
B) job tickets
C) payroll register
D) accounts payable register

Question 50

Depreciation

A) assures that assets are reported at fair market value
B) is discretionary for many firms
C) allocates the cost of an asset over its useful life
D) is the responsibility of the department using the asset

Question 51

Why would an organization require the paymaster to deliver all unclaimed paychecks to the internal audit department?

A) to detect a "phantom employee" for whom a check was produced
B) to prevent an absent employee's check from being lost
C) to avoid paying absent employees for payday
D) to prevent the paymaster from cashing unclaimed checks

Question 52

The document that records the total amount of time spent on a production job is the

A) time card
B) job ticket
C) labor distribution summary
D) personnel action form

Question 53

Cost accounting updates work-in-process accounts from

A) time cards
B) the labor distribution summary
C) job tickets
D) personnel action forms

Question 54

Asset maintenance involves

A) the recording of periodic depreciation
B) adjusting the asset records to reflect the cost of physical improvements
C) keeping track of the physical location of the assets
D) all of the above

Question 55

Which of the following is not a reasonable control for fixed assets?

A) Proper authorization is required for acquisition and disposal of fixed assets.
B) Fixed asset records show the location of each asset.
C) Fully depreciated assets are immediately disposed of.
D) Depreciation policies are in writing.

Question 56

The payroll department performs all of the following except

A) prepares paychecks
B) transfers adequate funds to the payroll imprest account
C) updates employee payroll records
D) prepares the payroll register

Question 57

The Fixed Asset System is similar to the expenditure cycle except

A) fixed asset transactions are non-routine and require special authorization and controls
B) fixed assets are capitalized,not expensed
C) both a and b
D) none of the above

Question 58

Payroll uses time card data to do all of the following except

A) prepare the payroll register
B) update employee payroll records
C) prepare the labor distribution summary
D) prepare paychecks

Question 59

The payroll department performs all of the following except

A) prepares the payroll register
B) distributes paychecks
C) updates employee payroll records
D) prepares paychecks

Question 60

The personnel action form provides authorization control by

A) preventing paychecks for terminated employees
B) verifying pay rates for employees
C) informing payroll of new hires
D) all of the above

Question 61

Which of the following works like a credit card with the time clock?

A) Biometric time clocks
B) Magnetic swipe ID cards
C) Mobile remote devices
D) Proximity cards

Question 62

Which of the following works through wallets,purses and card holders?

A) Biometric time clocks
B) Magnetic swipe ID cards
C) Mobile remote devices
D) Proximity cards

Question 63

Why should the employee's supervisor not distribute paychecks?

Question 64

What negative consequences result when fixed asset records include assets that are no longer owned by the firm?

Question 65

Describe an internal control that would prevent the charging of depreciation expense to the maintenance department for a sweeper that is now located in and used by the engineering department.

Question 66

Which of the following uses fingerprint or hand-vein scan technology to produce the time and attendance file?

A) Biometric time clocks
B) Magnetic swipe ID cards
C) Mobile remote devices
D) Proximity cards

Question 67

List four types of data that appear on a depreciation schedule.

Question 68

What is a personnel action form?

Question 69

Describe an internal control that would prevent the payment of insurance premiums on an automobile that is no longer owned by the company.

Question 70

Which documents prompt the fixed asset department to create a fixed asset record?

Question 71

Why should employees clocking on and off the job be supervised?

Question 72

Describe an internal control that would prevent an employee from stealing a computer and then reporting it as scrapped.

Question 73

Describe an internal control that would prevent the acquisition of office equipment which is not needed by the firm.

Question 74

Which of the following is popular among businesses with employees in the field who travel between clients and companies with foreign-based employees?

A) Biometric time clocks
B) Magnetic swipe ID cards
C) Mobile remote devices
D) Proximity cards

Question 75

Describe an internal control procedure that would prevent a supervisor from stealing the unclaimed paychecks of employees who have been terminated.

Question 76

Why should employee paychecks be drawn against a special checking account?

Question 77

In a manufacturing firm,employees typically fill out two different documents regarding their time worked.What are they? Why are there two?

Question 78

Describe an internal control procedure that would prevent an employee from punching the time clock for another,absent employee.

Question 79

Which of the following is NOT an input control to reduce the risks of data entry errors and payroll fraud for a company with a mobile or distributed work force?

A) Limit tests that detect excessive hours
B) Check digits that detect transcription errors in employee identification
C) Biometric scanners,swipe cards,and PINS
D) Multilevel security that achieves segregation of duties

Question 80

List two types of authorization required in the Fixed Asset System.