Question 1

Wexim Toys purchased merchandise from a supplier on credit, terms 2/10, n/30 for $9,300. Three days later, the company returned $1,100 of the merchandise. When recording the return transaction, the company would record:

Accepted Answer

When returning merchandise purchased on credit, the company needs to record the transaction by reducing the Accounts Payable and Inventory accounts. Therefore, the best choice is to debit Accounts Payable $1,100 and credit Inventory $1,100 in the general journal (option E). Option A records the transaction as if the company had paid for the merchandise in cash, which is incorrect. Option B records the transaction in the cash disbursements journal, but it should be recorded in the purchases journal. Option C records the transaction as if the company had received a credit from the supplier, which is also incorrect. Option D records the cash disbursement, but not the reduction in inventory.

Question 2

Explain the purposes, types, and uses of special journals.

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Question 3

Describe the posting process for special journals.

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Question 4

What are controlling accounts and subsidiary ledgers? What is the relationship between them?

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Question 5

A company entered into the following transactions. Match each transaction with the appropriate journal in which it should be recorded.
a. Sales journal
b. Purchases journal
c. Cash receipts journal
d. Cash disbursements journal
e. General journal
_____ 1. Borrowed $7,000 cash from the local bank.
_____ 2. A customer returned a $250 item purchased on account.
_____ 3. Purchased merchandise on account, $2,100.
_____ 4. Purchased equipment on account for $4,000.
_____ 5. Paid $15,000 cash in wages to employees.
_____ 6. Paid a telephone bill for $3,400 cash.
_____ 7. Purchased $1,150 of office supplies on account.
_____ 8. Recorded depreciation on office equipment of $2,000.
_____ 9. Returned defective inventory purchased on account, $2,550.
_____ 10. Recorded cash sales of $12,700.

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Question 6

Wildlife Wholesale Supply sold birdseed to a retailer for $860, receiving cash at the time of sale. The cost of the birdseed was $370. When recording the collection from the customer, in its cash receipts journal, Wildlife would enter:

Accepted Answer

The correct entry involves recording the cash received and the sales revenue, as well as the cost of goods sold and inventory reduction.

Question 7

Discuss the differences in the special journals between a company using a perpetual inventory system and one using a periodic inventory system.

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Question 8

Match the following accounting system components a-e with their related items 1-10 by placing the correct letter next to each item.
a. Source documents
b. Input devices
c. Information processor
d. Information storage
e. Output devices
_____ 1. Computer keyboard
2. Computer hard drive
_____ 3. Journal entries
_____ 4. Journals
_____ 5. Financial statements
_____ 6. Invoice from suppliers
_____ 7. Employee paychecks
_____ 8. Computer monitor
_____ 9. Software
_____ 10. Electronic files

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Question 9

A company entered into the following transactions. For each transaction, indicate the appropriate journal in which it should be recorded.
a. Sales Journal
b. Purchases Journal
c. Cash Receipts Journal
d. Cash Disbursements Journal
e. General Journal
_____ 1. Purchased merchandise on credit.
_____ 2. Sold merchandise on credit.
3. Purchased merchandise for cash.
_____ 4. Sold merchandise for cash.
_____ 5. Paid cash to settle the utility bill.
_____ 6. Owner invested more cash in the business.
_____ 7. Recorded depreciation for the period.
_____ 8. Borrowed cash from the bank.
9. Bought office supplies on credit.
10. Received cash from a customer to settle an account receivable.

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Question 10

Maxie's Game World sold games to a customer on credit for $2,600, terms 1/10, n/30 and the cost of the games was $1,700. When recording the collection from the customer made within the discount period, in its cash receipts journal, Maxie's would enter:

Accepted Answer

When the customer paid within the discount period, Maxie's would record the cash receipt as follows:
- $2,574 in the Cash Dr. column (the amount received after the 1% discount, calculated as $2,600 x 0.99)
- $26 in the Sales Discount Dr. column (the amount of the discount, calculated as $2,600 x 0.01)
- $2,600 in the Accounts Receivable Cr. column (to reduce the balance owed by the customer)
Note that the cost of the goods sold is already recorded when the sale was made, so there is no need to record it again in the cash receipts journal.

Question 11

Farthington Soccer Supplies purchases merchandise from a supplier on credit, terms 2/10, n/30 for $15,300. Assume the company uses a perpetual inventory system, and records purchases using the gross method. When recording the purchase transaction in its purchases journal, Farthington would enter:

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Question 12

List the five basic components of accounting information systems and give an example of each.

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Question 13

Explain how the amounts in the subsidiary ledgers are proved (or reviewed) for accuracy.

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Question 14

List the five basic principles of accounting information systems.

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Question 15

Enter the letter of the following terms on the line next to the appropriate definition of each.
1. The component of an accounting system that is the means to take information from an accounting system and make it available to users.
2. The means of collecting and processing data from transactions and events, organizing them into useful reports, and communicating results to decision makers.
3. A record of the separate accounts of each supplier that supports its general ledger controlling account.
4. The component of an accounting system that keeps data in a form accessible to information processors.
5. The special journal used to record all receipts of cash.
6. The special journal that is used to record all cash payments.
7. The component of an accounting system that captures source document information and enables
its transfer to the information processor.
8. An information system principle that prescribes that an accounting system have methods and procedures allowing managers to control and monitor business activities.
9. The special journal used to record all purchases made on account.
10. An information system principle requiring that an accounting system report useful, understandable, timely, and pertinent information for decision making.

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Question 16

Farthington Soccer Supplies purchases merchandise from a supplier on credit, terms 2/10, n/30 for $15,300. Assume the company uses a perpetual inventory system, and records purchases using the gross method. When recording the payment of the invoice within the discount period in its cash disbursement journal, Farthington would enter:

Accepted Answer

Under the gross method, the purchase is recorded at the full invoice amount initially. Therefore, when Farthington records the payment of the invoice within the discount period, they will debit Accounts Payable for the full amount of $15,300 and credit Cash for the discounted amount of $14,994. They will also credit Inventory for the amount of the discount, which is $306 ($15,300 x 2%). Therefore, the correct entry is:
Accounts Payable Dr. $15,300
Cash Cr. $14,994
Inventory Cr. $306

Question 17

Discuss how technology based information systems affect accounting.

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Question 18

Match the following terms with the appropriate definitions.
a. Sales journal
b. Controlling account
c. Accounts receivable ledger
d. Cash disbursements journal
e. Cash receipts journal
f. Schedule of accounts payable
g. Segment return on assets
h. Columnar journal
i. Special journal
j. Purchases journal
_____ 1. The special journal used to record all receipts of cash.
_____ 2. A journal with more than one column for recording data.
_____ 3. A record of the separate accounts of each credit customer that is controlled by a general
ledger account.
_____ 4. A journal used to record all purchases on credit.
_____ 5. A journal used to record sales of merchandise on credit.
6. A measure of the profitability of a segment, calculated as segment operating income divided by segment average assets.
7. A special journal used to record all payments of cash.
_____ 8. Any journal used for recording and posting transactions of a similar type.
_____ 9. A general ledger account, the balance of which, after posting, equals the sum of the balances of the accounts in its related subsidiary ledger.
_____ 10. A list of each customer from the accounts payable ledger with their balances and the total.

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Question 19

What is the segment return on assets ratio? What is it used for?

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Question 20

What is footing and crossfooting of the column totals in special journals? What is the purpose?

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Quiz 7: Accounting Information Systems