ACG2001 Accounting Test 3 Review

ch07Student: ___________________________________________________________________________

1. Accounting information systems collect and process data from transactions and events, organize them in useful reports, and communicate results to decision makers.

True False

2. Accounting information systems are so accurate that decision makers in practice do not need a basic knowledge of how the systems work.

True False

3. The five basic principles of accounting information systems are control, competency, compatibility, flexibility and cost-benefit.

True False

4. Internal controls include policies to direct operations toward common goals, procedures to ensure reliable financial reports, safeguards to protect company assets and methods to achieve compliance with laws and regulations.

True False

5. The flexibility principle prescribes that an accounting information system conform with a company's activities, personnel, and structure and adapt to a company's unique characteristics.

True False

6. The compatibility principle requires that an accounting system report useful, understandable, timely, and pertinent information for effective decision making.

True False

7. The cost-benefit principle prescribes that the benefits from an activity in an accounting information system outweigh the costs of that activity.

True False

8. Accounting information systems are designed to capture information about a company's transactions and events and to provide output including financial, managerial, and tax reports.

True False

9. Due to electronic files and Web communications, source documents are no longer required.

True False

10. Accurate source documents are crucial to accounting systems to limit the possibility of entering faulty data into the system.

True False

11. With advanced technology there is no need to trace information that has been entered into an accounting information system to its source.

True False

12. With on-line systems, all information storage should be off-line to protect the data.

True False

13. Accounting information processes are structured to eliminate the need for professional judgment.

True False

14. Auditors rely on accounting system databases when they audit financial statements and a company's controls.

True False

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15. Input devices are the means to make accounting information available to users.

True False

16. Input devices include journal entries, keyboards, scanners, and modems.

True False

17. A special journal is used to record and post transactions of a similar type.

True False

18. A sales journal is used to record cash sales.

True False

19. The purchases journal is used to record cash purchases of merchandise.

True False

20. The general journal is used for transactions not covered by special journals and for adjusting, closing, and correcting entries.

True False

21. Special journals allow an efficient division of labor, which is also an effective control procedure.

True False

22. When posting from special journals each debit and credit entry is entered as a separate amount in the general ledger.

True False

23. Most transactions for merchandising businesses fall into four groups: sales, purchases, cash receipts, and cash disbursements.

True False

24. Special journals are designed in a manner that is best suited for each business, so good systems design for a business could include collapsing the sales and cash receipts journal into one journal.

True False

25. A subsidiary ledger is a listing of individual accounts with a common characteristic.

True False

26. Two common subsidiary ledgers are cash receipts and cash disbursements.

True False

27. The accounts payable ledger is used for storing transactions data regarding individual customers.

True False

28. The accounts payable ledger has a controlling account in the general ledger and a separate subsidiary account for each creditor in the accounts payable ledger.

True False

29. Equipment, inventory, and investments are other accounts that can include detailed information in a subsidiary ledger.

True False

30. Subsidiary ledgers are not needed in perpetual inventory systems because the accounting system captures sufficient details to support analyses that decision makers need.

True False

31. An advantage of online processing is up-to-date databases.

True False

32. Off-the-shelf accounting software is not adequate to meet the needs of small businesses.

True False


33. Enterprise resource planning software packages include the programs that manage a company's vital operations.

True False

34. Computer networks are links among computers giving different users and different computers access to common databases and programs.

True False

35. Enterprise resource planning software is primarily used for recording journal entries.

True False

36. Most companies use batch processing instead of online processing because batch processing immediately updates databases.

True False

37. The SAP enterprise-resource planning software is already being used to help direct the operations of many of the world's largest companies.

True False

38. A business segment is a part of a company that is separately identified by its products or services, or by the geographic market it serves.

True False

39. Segment return on assets is segment operating income divided by segment average assets.

True False

40. External users of financial statements are generally uninterested in segment information to understand a company's business activities.

True False

41. Segment information is often useful to investors for evaluating a company's profitability, risk, and growth.

True False

42. A columnar journal is any journal with only one column.

True False

43. Individual transactions in the sales journal are regularly posted to customer accounts in the accounts payable ledger.

True False

44. Three transactions that would be recorded in the sales journal are: (1) recording sales taxes (2) recording sales returns and allowances and (3) recording purchases discounts.

True False

45. Each transaction recorded in the sales journal yields a debit to Accounts Receivable and a credit to Sales.

True False

46. Posting debits from the Sales journal to Accounts Receivable twice - once to the general ledger account Accounts Receivable and once to the customer's subsidiary account - violates the accounting equation of debits equal credits.

True False

47. A procedure called direct posting of sales invoices can substitute for the sales journal.

True False

48. Account balances in the general ledger and the subsidiary ledgers should be proved for accuracy after posting is complete.

True False


49. A schedule of accounts receivable is a listing of all creditor accounts and account balances.

True False

50. If the total balance of the accounts receivable ledger equals the total of the controlling Accounts Receivable account, then the accounts are presumed to be correct.

True False

51. To check for accuracy after posting: first a trial balance is completed, then, the subsidiary ledgers are tested by preparing a schedule of the controlling account.

True False

52. A company using the periodic inventory system does not record the increase in cost of goods sold and decrease in inventory at the time of each sale in the sales journal.

True False

53. The purchases journal is identical under both the periodic and the perpetual inventory systems.

True False

54. The difference in the sales journal between the perpetual and periodic inventory systems is that a column is used to record cost of goods sold and inventory amounts for each sale under the perpetual system but not the periodic system.

True False

55. All of the following statements regarding accounting information systems are true except:

A. Accounting information systems collect and process data from transactions and events.B. Accounting information systems organize data in useful forms.C. Accounting information systems do not establish internal control procedures.D. Accounting information systems are crucial to effective decision making.E. Accounting information systems communicate information to business decision makers.

56. All of the following statements regarding internal control procedures are true except:

A. Internal control procedures are designed to ensure reliable financial reports.B. Internal control procedures are designed to safeguards company assets.C. Internal control procedures direct operations toward common goals.D. Internal control procedures include methods to achieve compliance with laws and regulation.E. Internal control procedures are bit affected by the cost-benefit principle.

57. The control principle for accounting information systems requires that the:

A. Benefits from an activity outweigh the costs of the activity.B. System report useful, understandable, timely, and pertinent information for effective decision making.C. System must have internal controls.D. System adapts to changes in the company, business environment, and needs of decision makers.E. System conforms to a company's activities, personnel, and structure.

58. The flexibility principle of accounting information systems prescribes that the:

A. Benefits from an activity outweigh the costs of the activity.B. System report useful, understandable, timely, and pertinent information for effective decision making.C. System aid managers in controlling and monitoring business activities.D.

System be able to adapt to changes in the company, business environment, and needs of decision makers.

E. System conforms to a company's activities, personnel, and structure.

59. The accounting principle that prescribes an accounting information system to report useful, understandable, timely, and pertinent information for effective decision-making is the:

A. Control principle.B. Compatibility principle.C. Relevance principle.D. Flexibility principle.E. Cost-Benefit principle.


60. The five fundamental principles of accounting information systems are:

A. Control, accountability, relevance, compatibility, and flexibility.B. Historical cost, relevance, compatibility, flexibility, and cost-benefit.C. Control, relevance, compatibility, flexibility, and safety.D. Control, relevance, compatibility, timeliness, and cost-benefit.E. Control, relevance, compatibility, flexibility, and cost-benefit.

61. All of the following statements regarding accounting information systems are true except:

A. Accounting information systems consist of people, records, methods, and equipment.B. Accounting information systems have the same goals and share basic components.C. Accounting information systems are less important than ever to decision makers.D.

Accounting information systems are designed to provide output including financial, managerial, and tax reports.

E. Accounting information systems are designed to capture information about a company's transactions.

62. The basic components of an accounting information system include all of the following except:

A. Source documents.B. Warehouses.C. Information processors.D. Information storage.E. Input devices.

63. Source documents:

A. Are input devices.B. Provide the basic information processed by an accounting system.C. Cannot be electronic files.D. Store processed information for future use.E. Cannot be paper documents.

64. Input devices include:

A. Bar-code readers.B. Printers.C. Software.D. Ledgers.E. Information processors.

65. Information storage:

A. Eliminates the need for professional judgment.B. Keeps data in a form accessible to information processors.C. Provides the basic information processed by an accounting system.D. Captures information from source documents.E. Cannot be online.

66. Output devices include all of the following except:

A. Printers.B. Monitors.C. LCD projectors.D. Web communications.E. Bar code readers.

67. Information processors:

A. Include information storage.B. Interpret, transform, and summarize information for use in analysis and reporting.C. Are components of an accounting system that keep data in accessible form.D. Are the means to take information out of an accounting system and make it available to users.E. Include scanners.


68. The special journals of many accounting systems include the:

A. Sales journal.B. Purchases journal.C. Cash receipts journal.D. Cash disbursements journal.E. General Ledger.

69. The sales journal is used for recording:

A. Credit purchases.B. Credit sales.C. Cash sales.D. Cash purchases.E. Cash receipts.

70. The purchases journal is used for recording:

A. Credit purchases.B. Credit sales.C. Cash sales.D. Cash purchases.E. Cash disbursements.

71. A log that is used to record and post transactions of a similar type is a:

A. Schedule.B. Columnar ledger.C. Special journal.D. General journal.E. Subsidiary ledger.

72. When a company uses special journals, the general journal is used for selected transactions and events including:

A. Recording adjusting transactions.B. Posting transactions to special journals.C. Accumulating debits and credits.D. Collecting detailed listings of amounts.E. Recording cash receipts.

73. A record that contains all accounts (with amounts) of a company is the:

A. General ledger.B. General journal.C. Special ledger.D. Special journal.E. Column balance ledger.

74. A subsidiary ledger:

A. Includes transactions not covered by special journals.B. Is a listing of all of the accounts of a business.C. Is a listing of individual accounts and amounts with a common characteristic.D. Is also called a general ledger.E. Is also called a special journal.

75. A subsidiary ledger that contains a separate account for each supplier (creditor) to the company is a(n):

A. Controlling account.B. Accounts receivable ledger.C. Accounts payable ledger.D. General ledger.E. Special journal.


76. An accounts payable ledger is:

A. A subsidiary ledger that contains an account for each supplier (creditor).B.

A list of the balances of all the accounts in the accounts receivable ledger that is added to show the total amount of accounts receivable outstanding.

C. A book of original entry that is designed and used for recording only a specific type of transaction.D. The ledger that contains the financial statement accounts of a business.E.

A subsidiary ledger that contains a separate account for each party that grants both short-term and long-term credit on account to the company.

77. Assume that a company uses a sales journal, a purchases journal, a cash receipts journal, a cash disbursements journal, and a general journal. A sales return for credit on account would be recorded in the:

A. Sales journal.B. General journal.C. Cash receipts journal.D. Accounts receivable ledger.E. Cash disbursements journal.

78. An accounts receivable ledger is:

A. A subsidiary ledger that contains an account for each credit customer.B.

A list of the balances of selected accounts in the accounts receivable ledger that is added to show the total amount of the significant accounts receivable outstanding.

C. A book of original entry that is designed and used for recording only a specified type of transaction.D. The ledger that contains the financial statement accounts of a business.E. A subsidiary ledger that contains a separate account for each creditor (supplier) to the company.

79. The use of an Accounts Payable controlling account:

A. Reduces the number of accounts in the subsidiary ledger.B. Reduces the total number of accounts maintained.C. Reduces the number of entries in the general journals.D. Reduces the number of accounts in the general ledger.E. Increases the number of columns in the journals.

80. Subsidiary ledgers do all of the following except:

A. Remove excessive detail from the general ledger.B. Provide up-to-date information on customer or other specific account balances.C. Aid in error identification for individual accounts.D. Help with division of labor (recordkeeping tasks).E. Eliminate the need for individual postings to the customer or supplier accounts.

81. The accounts receivable ledger:

A. Is for storing transaction data for customers.B. Is for storing transaction data for individual customers.C. Is for storing transaction data for individual creditors.D. Is for storing transaction date for creditors.E. Is also the controlling account.

82. Enterprise-resource planning software:

A. Refers to programs that help manage a company's vital operations.B. Is another name for spreadsheet programs.C. Uses batch processing of business information.D. Is substantially declining in use.E. Is another name for database programs.


83. An approach that enters and processes data as soon as source documents are available is called:

A. Date storage.B. Batch processing.C. Online processing.D. Computer programmingE. Web communications.

84. Which of the following does not apply to enterprise resource planning (ERP) software:

A. ERP refers to programs that help manage a company's vital operations.B. ERP can include programs that extend from order taking to manufacturing to accounting.C. ERP can speed up business decision making and help reduce costs.D. ERP can not be used to share data with customers and suppliers.E. ERP can be designed to link every part of a company's operations.

85. A business segment:

A. Requires only internal reporting.B. Is a part of a company that is separately identified by its products, services, or geographic market.C. Requires special journals.D. Requires subsidiary ledgers.E. Cannot report its results separately.

86. Kala's Latin American segment had revenues of $2,089 million, operating income of $1,033 million, and average assets of $1,443 millions. The Latin American segment return on assets is:

A. 49.4%B. 69.0%C. 71.6%D. 139.7%E. 144.8%

87. The segment return on assets:

A. Can only be determined for international companies.B. Reflects the profitability of a segment.C.

Is difficult to calculate because companies with traded stock are not required to report segment information.

D. Is calculated as segment average assets divided by segment operating income.E. Is calculated as segment sales divided by segment average assets.

88. When the sales journal's column for accounts receivable and sales is totaled at the end of the month, its total is:

A. Debited to Sales and credited to Accounts Receivable.B. Debited to Accounts Receivable and credited to Cash.C. Debited to Cash and credited to Accounts Receivable.D. Debited to Accounts Receivable and credited to Sales.E. Debited to Cash and credited to Sales.

89. A list of all the accounts in the accounts receivable ledger with their balances and the total is a(n):

A. Schedule of accounts.B. Controlling account.C. Schedule of accounts receivable.D. Subsidiary ledger.E. Special journal.

90. The Accounts Payable account in the general ledger is:

A. A controlling account for the subsidiary accounts payable ledger.B. The account that controls the purchases journal.C. The subsidiary account to the purchases journal.D. Part of a special journal.E. Part of a subsidiary ledger.


91. After posting is completed, there may be an error if:

A. The sum of the customer account balances does not equal the total in the sales journal.B. The sum of the accounts receivable ledger does not equal the balance in the Sales account.C.

The sum of the customer account balances does not equal the general ledger Accounts Receivable controlling account balance.

D. The balance in the sales journal does not equal the Accounts Receivable account balance.E. The sum of the accounts receivable ledger does not equal the balance in the sales journal.

92. Assume that a company using a purchases journal made an error in totaling the journal's accounts payable column. The error should be discovered:

A. When the purchases journal is posted to the general ledger.B. When the sum of the vendor accounts does not equal the balance in the Purchases journal.C.

When the total of the schedule of accounts payable is compared with the balance of the Accounts Payable account.

D. When the creditors receive their payments.E. When the financial statements are prepared.

93. The main difference in the sales journal under the perpetual and periodic inventory system is:

A.

The column to record cost of goods sold and inventory amounts sold that is used under the perpetual system but not the periodic.

B. The sales tax receivable column that is used under the perpetual system but not the periodic.C. The sales tax payable column that is used under the perpetual system but not the periodic.D. The accounts receivable column that is used under the perpetual system but not the periodic.E. The column for recording cash that is used under the perpetual system but not the periodic.

94. The accounting principle that prescribes an accounting information system conform with a company's activities, personnel, and structure is the:

A. Control principle.B. Compatibility principle.C. Relevance principle.D. Flexibility principle.E. Cost-Benefit principle.

95. All of the following statements regarding source documents are true except:

A. Source documents provide the basic information processed by an accounting system.B. Source documents include bank statements, cash register files, and employee earnings records.C. Source documents are insignificant and play a minor role in the reliability of the information system.D. Source documents can be paper or electronic files.E. Source documents can include Web communications.

96. All of the following statements regarding input devices are true except:

A.

Input devices capture information from source documents and enable its transfer to the system's information processing component.

B. Input devices convert data on source documents from written form to a form usable for the system.C. Input devices include keyboards, scanners, and modems.D. Input devices include journal entries.E. Input devices are always reliable and no controls are needed to verify accuracy of input.

97. For a retailer required to collect sales taxes from customers, all of the following adaptations would be made to the sales journal except:

A. Column totals would continue to be posted as usual.B. A Sales Taxes Payable credit column would be added.C. There would be a separate Accounts Receivable debit column.D. A Sales Taxes Payable debit column would be added.E. There would be a separate Sales credit column.


98. To be sure that total debits and credits in a columnar journal are equal, before posting we should:

A. Crossfoot.B. Foot.C. Journalize.D. Post.E. Reconcile.

99. A company borrowed $50,000 from a bank by signing a long-term note payable. Identify the journal the transaction would be recorded in.

A. Cash disbursements journal.B. Sales journal.C. Cash receipts journal.D. Purchases journal.E. General journal.

100.A company had cash sales of $24,000 (cost is $13,000). Identify the journal the transaction would be recorded in.

A. Cash disbursements journal.B. Sales journal.C. Cash receipts journal.D. Purchase journal.E. General journal.

101.A company sold merchandise on credit for $5,000 (cost is $2,400). Identify the journal the transaction would be recorded in.


102.A company purchased $11,200 of merchandise on credit. Identify the journal the transaction would be recorded in.


103.A company received payment of $9,800 from a customer within the discount period. Identify the journal the transaction would be recorded in.


104.A company issued a check for $7,900 in payment of merchandise. Identify the journal the transaction would be recorded in.



105.A company purchased equipment costing $32,000 on credit. Identify the journal the transaction would be recorded in.


106.A company issued a check for $7,900 in payment of the salaries expense for the last half of the month. Identify the journal the transaction would be recorded in.


107.A company had average total assets of $982,450 and net income of $190,700, and reports various segment information. Segment A had average total assets of $437,800 and segment operating income of $98,230. Segment B had average assets of $151,200 and segment operating income of $16,190. Calculate the segment return on assets for Segment A.

A. 19.4%.B. 22.4%.C. 26.1%.D. 10.7%.E. 20.2%.

108.A company had average total assets of $982,450 and net income of $190,700, and reports various segment information. Segment A had average total assets of $437,800 and segment operating income of $98,230. Segment B had average assets of $151,200 and segment operating income of $16,190. Calculate the segment return on assets for Segment B.

A. 19.4%.B. 22.4%.C. 26.1%.D. 10.7%.E. 20.2%.


109.Identify the accounting information system principle below that applies to each of these situations.

1. Cost-benefit

Global Company has designed their accounting information system to be adaptable to changes in technology, the business environment,

and the needs of decision makers.

_

_

_

_

2. Relevance

Global Company has world-wide operations that must handle several thousand different products, so the accounting information

system is fairly complex, encompassing marketing and manufacturing.

_

_

_

_

3. Compatibility

Global Company's accounting information system has policies to ensure that financial statements will be reliable, assets are protected,

and relevant laws and regulations are complied with.

_

_

_

_

4. Control

Global Company's accounting information system can be improved markedly for a cost of about $30,000,000. However, the incremental benefits from such improvements are not expected to outweigh this

cost.

_

_

_

_

5. Flexibility

Global Company has designed their accounting information system so that key managers can obtain the information they need to make

decisions relating to new products, sales, and controlling costs.

_

_

_

_

110.Match the following accounting system components a through e with the appropriate application(s) 1 through 10:

1. Source documents Computer keyboard ____ 2. Information storage Computer hard drive ____ 3. Output devices Journal entries ____ 4. Information processor Journals ____ 5. Information processor Financial statements ____ 6. Output devices Invoice from suppliers ____ 7. Input devices Employee paychecks ____ 8. Source documents Computer monitor ____ 9. Output devices Software ____ 10. Input devices Electronic files ____


111.Match the following terms with the appropriate definition(s).

1. Schedule of accounts receivable

The people, records, methods, and equipment that collect and process data from transactions and events, organize them in

useful forms, and communicate results to decision makers.

_

_

_

_

2. Control principle

A part of a company that can be separately identified by the products or services that it provides, or by the geographic

market that it serves.

_

_

_

_

3. Information processor

The special journal used to record all receipts of cash. _

_

_

_

4. Cash disbursements journal

An information system principle requiring that an accounting information system aid managers in controlling and monitoring

business activities.

_

_

_

_

5. Relevance principle

An information system principle requiring that an accounting system report useful, understandable, timely, and pertinent

information for decision making.

_

_

_

_

6. Computer network

Programs that manage a company's vital operations which range from order-taking to manufacturing to accounting.

_

_

_

_

7. Cash receipts journal

The special journal that is used to record all payments of cash.

_

_

_

_

8. Business segment

Links among computers giving different users and different computers access to common databases and programs.

_

_

_

_

9. Accounting information system

The component of an accounting system that interprets, transforms, and summarizes information for use in analysis and

reporting.

_

_

_

_

10. Enterprise resource planning

A list of each customer from the accounts receivable ledger with their balances and the total.

_

_

_

_


112.Match the following terms with the appropriate definitions.

Cash receipts journal:;The special journal that is used to record all receipts of cash.

Segment return on assets:A measure of the profitability of a segment, calculated as segment operating income divided by segment average assets.

1. Special journal

An information system principle requiring that an accounting information system conform with a company's

activities, personnel, and structure.

_

__

_

2. Information storage

An information system principle requiring that the benefits from an activity in an accounting information system

outweigh the costs of that activity.

_

__

_

3. Cost-benefit principle

A journal used to record all purchases on credit. ___

_

4. Purchases journal

A journal used to record sales of merchandise on credit. ___

_

5. Sales journal

The component of an accounting system that keeps data in a form accessible to information processors.

_

__

_

6. Schedule of accounts receivable

Any journal used for recording and posting transactions of a similar type.

_

__

_

7. Controlling account

A general ledger account, the balance of which (after posting) equals the sum of the balances of the accounts in a

related subsidiary ledger.

_

__

_

8. Compatibility principle

A list of each customer from the accounts receivable ledger with their balances and the total.

_

__

_

113.A company entered into the following transactions. Match each transaction with the appropriate journal.

1. General journal Borrowed $5,000 cash from the bank. ___

_

2. Cash receipts journal A customer returned a $250 item purchased on account.

___

_

3. Cash receipts journal Purchased merchandise on account, $2,700. ____

4. Purchases journal Purchased a display rack on account for $4,700.

___

_

5. Purchases journal Paid $65,000 cash in wages and salaries. ____

6. General journal Paid a utility bill for $3,400 cash. ____


Purchased $1,590 of store supplies on account.

___

_


Recorded depreciation on store equipment of $4,000.

___

_

9. General journal Returned defective inventory purchased on account, $2,900.

___

_

10. Purchases journal Recorded cash sales of $14,700. ____


114.A company entered into the following transactions. For each transaction, indicate the appropriate journal.

1. General Journal Purchased merchandise for cash. ___

_

2. Cash Receipts Journal Sold merchandise for cash. ____

3. Cash Receipts Journal Purchased merchandise on credit. ____

4. Sales Journal Sold merchandise on credit ____

5. Cash Receipts Journal Paid cash to settle the utility bill. ____

6. Purchases Journal Owner invested more cash in the business. ____

7. Cash Disbursements Journal

Recorded depreciation for the period. ____

8. Cash Receipts Journal Borrowed cash from the bank. ____


Bought store supplies for cash. ____


Customer sent in cash to settle an account receivable.

___

_

115.List the five basic principles of accounting information systems.

116.What are the five basic components of accounting information systems

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

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


119.Discuss how technology based information systems affect accounting

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

121.Describe the posting process for special journals.

122.Explain how the amounts in the subsidiary ledgers are tested for accuracy.

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

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


125.Kim Jordan, founder of New Belgium Brewing Company, knew that accounting systems were important for success. Explain how Kim used an accounting system to assess business operations?

126.The following information is available for some of Kalo's segments (all amounts are in millions)

a. Determine the segment return on assets for each geographic segment.

b. Comment on the results. How do the segments compare with respect to profitability?


127.The Woodview Company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal. They use the perpetual method. The following transactions occurred during the current month of

December:

Record the above transactions into the appropriate journals shown below.


128.A company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal. A perpetual inventory system is used. The following transactions were completed by the company during the current month of

October:

Record these transactions in the appropriate journal shown

below.


129.Renton Co. uses special journals to record its transactions. They use the perpetual inventory system. Shown below are the purchasing and cash disbursement transactions for current month of

May:

Record these transactions in the following

journals. Answer: Answers will vary

Feedback:


130.The following special journal is taken from a merchandising company that uses the perpetual inventory

system:

1. What is the name of the journal shown above?

2. Write an explanation for each entry in this journal.

3. What do the numbers in parentheses at the bottom of the journal indicate?

131.A company records its transactions and events in four special journals and a general journal. The company completed the following transactions a through j. Identify the journal in which each transaction should be recorded.


132.A company uses four special journals: purchases, sales, cash receipts, and cash disbursements. The following transactions were incurred during

August:

Record these transactions in the appropriate special journals

below.


133.Williams Company began business on May 1. They use the perpetual inventory method. The following transactions involving purchases and cash disbursements occurred during the first week of

May.

a. Use the purchases journal and the cash disbursements journal to record these transactions.

b. Prepare a schedule of accounts payable. There was no accounts payable on May

1.


134.The Sun Company completed the following sales and cash receipts transactions during the first week of December. The Sun Company uses the perpetual inventory

system.

a. Use the sales journal and the cash receipts journal to record these transactions.

b. Prepare a schedule of accounts receivable. There was no accounts receivable balance at December

1.

135.Outdoors Unlimited uses special journals to record its daily transactions. They use the perpetual inventory system. Shown below is its cash receipts journal and selected ledger accounts. Post the cash receipts journal to the appropriate ledger

accounts.


136.The Woodview Company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal. They use the periodic inventory method. The following transactions occurred during the month of

December:

Record these transactions using the journals

below.


137.Williams Company began business on May 1. They use the periodic inventory method. The following transactions involving purchases and cash disbursements occurred during the first week of

May.

a. Use the purchases journal and the cash disbursements journal to record these transactions.

b. Prepare a schedule of accounts payable. There was no accounts payable balance on May

1.


138.The Sun Company completed the following sales and cash receipts transactions during the first week of December. The Sun Company uses the periodic inventory system.

a. Use the sales journal and the cash receipts journal to record these transactions.

b. Prepare a schedule of accounts receivable. There was no accounts receivable balance at December 1.

139.The following information is available for AllBev, Inc. (all amounts are in

millions):



c. What measures could be taken to improve segment return?


140.Argon Sales uses special journals to record business transactions. Argon sells construction equipment. Argon completed the following transactions a through j. Identify the journal in which each transaction

should be recorded.

141.Lester Company uses special journals to record transactions. All of the companies listed below supply inventory to Lester except Harry Co. that supplies equipment. Use the purchases journal given below to answer the following questions:

a. Foot and crossfoot the journal for

accuracy.

b. Identify the error and indicate how to correct the error.

c. When Lester compares the general ledger Accounts Payable account to the Accounts Payable ledger, it notices that the general ledger control account is $10,000 more that the schedule of Accounts Payable. What is the most likely cause and how should it be corrected?


142.Philip Company uses special journals to record transactions. Below are the sales journal and cash receipts journal for Philip. Prepare the following:

a. Open an accounts receivable subsidiary ledger having a T-account for each customer. Post the invoices to the subsidiary ledger.

b. Open an Accounts Receivable controlling T-Account. Post the end-of the month totals that affect the Accounts Receivable account only.

c. Prepare a schedule of accounts receivable and prove that its total equals the Accounts Receivable

controlling account balance.


143.Medco Company uses special journals to record transactions. Medco uses the perpetual inventory system. Journalize the following transactions in the appropriate special journal. All credit sales

have 2/10, n/30 terms.


144.The following information is available for Bosc, Inc. (all amounts are in

millions):



145.The __________________ principle requires that the benefits from an activity in an accounting information system outweigh the costs of that activity.

________________________________________

146.The _____________________ principle requires that an accounting information system aid managers in controlling and monitoring business activities.

________________________________________

147._____________________________________ consist of people, records, methods, and equipment that collect and process data from transactions and events, organize them in useful reports and communicate results to decision makers.

________________________________________

148.The __________________ principle requires that an accounting information system report useful, understandable, timely, and pertinent information for effective decision making.

________________________________________

149.The __________________ principle requires that an accounting information system conform with a company's activities, personnel, and structure, and must adapt to a company's unique characteristics.

________________________________________

150.The __________________ principle requires that an accounting information system must be able to adapt to changes in the company, business environment, and needs of decision makers.

________________________________________

151.______________________ provide the basic information processed by an accounting system, and can include bank statements, billings to customers, and employee earnings records.

________________________________________

152.______________________ capture information from source documents and enable its transfer to the system's information processing component.

________________________________________

153._____________________ are systems that interpret, transform, and summarize information for use in analysis and reporting.

________________________________________

154.____________________ is the accounting system component that keeps data in a form accessible to information processors.

________________________________________

155.____________________ are the means to take information out of an accounting system and make it available to users.

________________________________________


156.A __________________ journal is used to record and post transactions of similar type.

________________________________________

157.A __________________ is an all-purpose journal that can record any transaction.

________________________________________

158.Using __________________ ledgers removes unnecessary details from the general ledger.

________________________________________

159._______________________________________ refers to the programs that help managers direct a company's vital operations.

________________________________________

160.___________________ processing enters and processes data as soon as source documents are available.

________________________________________

161.__________________ processing accumulates source documents for a period of time and then processes them all at once such as daily, weekly, or monthly.

________________________________________

162._______________________ are links among computers giving different users and different computers access to common databases and programs.

________________________________________

163.A ____________________ is a part of a company that is separately identified by its products, or services, or by the geographic market it serves.

________________________________________

164.The _______________________ ratio is a measure of a segment's profitability and is calculated as segment operating income divided by segment average assets.

________________________________________

165.Individual transactions in the sales journal are posted regularly to customers' accounts in the _______________________________________.

________________________________________

166.A _______________________________________ is a listing of accounts from the accounts payable ledger with their balances and the sum of all balances.

________________________________________

167.The difference in the sales journal between the perpetual and periodic inventory systems is a column to record ___________________________ and __________________ for each sale. This column is used in the perpetual system but not in the periodic.

________________________________________


ch07 Key 1. TRUE

2. FALSE

3. FALSE

4. TRUE

5. FALSE

6. FALSE

7. TRUE

8. TRUE

9. FALSE

10. TRUE

11. FALSE

12. FALSE

13. FALSE

14. TRUE

15. FALSE

16. TRUE

17. TRUE

18. FALSE

19. FALSE

20. TRUE

21. TRUE

22. FALSE

23. TRUE

24. TRUE

25. TRUE

26. FALSE

27. FALSE

28. TRUE

29. TRUE

30. FALSE

31. TRUE

32. FALSE

33. TRUE

34. TRUE

35. FALSE

36. FALSE


37. TRUE

38. TRUE

39. TRUE

40. FALSE

41. TRUE

42. FALSE

43. FALSE

44. FALSE

45. TRUE

46. FALSE

47. TRUE

48. TRUE

49. FALSE

50. TRUE

51. FALSE

52. TRUE

53. FALSE

54. TRUE

55. C

56. E

57. C

58. D

59. C

60. E

61. C

62. B

63. B

64. A

65. B

66. E

67. B

68. E

69. B

70. A

71. C

72. A

73. A

74. C


75. C

76. A

77. B

78. A

79. D

80. E

81. B

82. A

83. C

84. D

85. B

86. C

87. B

88. D

89. C

90. A

91. C

92. C

93. A

94. B

95. C

96. E

97. D

98. A

99. C

100. C

101. B

102. D

103. C

104. A

105. D

106. A

107. B

108. D

109. Flexibility :: Global Company has designed their accounting information system to be adaptable to changes in technology, the business environment, and the needs of decision makers. and Compatibility :: Global Company has world-wide operations that must handle several thousand different products, so the accounting information system is fairly complex, encompassing marketing and manufacturing. and Control :: Global Company's accounting information system has policies to ensure that financial statements will be reliable, assets are protected, and relevant laws and regulations are complied with. and Cost-benefit :: Global Company's accounting information system can be improved markedly for a cost of about $30,000,000. However, the incremental benefits from such improvements are not expected to outweigh this cost. and Relevance :: Global Company has designed their accounting information system so that key managers can obtain the information they need to make decisions relating to new products, sales, and controlling costs.


110. Input devices :: Computer keyboard and Information storage :: Computer hard drive and Input devices :: Journal entries and Information processor :: Journals and Output devices :: Financial statements and Source documents :: Invoice from suppliers and Output devices :: Employee paychecks and Output devices :: Computer monitor and Information processor :: Software and Source documents :: Electronic files

111. Accounting information system :: The people, records, methods, and equipment that collect and process data from transactions and events, organize them in useful forms, and communicate results to decision makers. and Business segment :: A part of a company that can be separately identified by the products or services that it provides, or by the geographic market that it serves. and Cash receipts journal :: The special journal used to record all receipts of cash. and Control principle :: An information system principle requiring that an accounting information system aid managers in controlling and monitoring business activities. and Relevance principle :: An information system principle requiring that an accounting system report useful, understandable, timely, and pertinent information for decision making. and Enterprise resource planning :: Programs that manage a company's vital operations which range from order-taking to manufacturing to accounting. and Cash disbursements journal :: The special journal that is used to record all payments of cash. and Computer network :: Links among computers giving different users and different computers access to common databases and programs. and Information processor :: The component of an accounting system that interprets, transforms, and summarizes information for use in analysis and reporting. and Schedule of accounts receivable :: A list of each customer from the accounts receivable ledger with their balances and the total.

112. Compatibility principle :: An information system principle requiring that an accounting information system conform with a company's activities, personnel, and structure. and Cost-benefit principle :: An information system principle requiring that the benefits from an activity in an accounting information system outweigh the costs of that activity. and Purchases journal :: A journal used to record all purchases on credit. and Sales journal :: A journal used to record sales of merchandise on credit. and Information storage :: The component of an accounting system that keeps data in a form accessible to information processors. and Special journal :: Any journal used for recording and posting transactions of a similar type. and Controlling account :: A general ledger account, the balance of which (after posting) equals the sum of the balances of the accounts in a related subsidiary ledger. and Schedule of accounts receivable :: A list of each customer from the accounts receivable ledger with their balances and the total.

113. Cash receipts journal :: Borrowed $5,000 cash from the bank. and General journal :: A customer returned a $250 item purchased on account. and Purchases journal :: Purchased merchandise on account, $2,700. and Purchases journal :: Purchased a display rack on account for $4,700. and Cash disbursements journal :: Paid $65,000 cash in wages and salaries. and Cash disbursements journal :: Paid a utility bill for $3,400 cash. and Purchases journal :: Purchased $1,590 of store supplies on account. and General journal :: Recorded depreciation on store equipment of $4,000. and General journal :: Returned defective inventory purchased on account, $2,900. and Cash receipts journal :: Recorded cash sales of $14,700.

114. Cash Disbursements Journal :: Purchased merchandise for cash. and Cash Receipts Journal :: Sold merchandise for cash. and Purchases Journal :: Purchased merchandise on credit. and Sales Journal :: Sold merchandise on credit and Cash Disbursements Journal :: Paid cash to settle the utility bill. and Cash Receipts Journal :: Owner invested more cash in the business. and General Journal :: Recorded depreciation for the period. and Cash Receipts Journal :: Borrowed cash from the bank. and Cash Disbursements Journal :: Bought store supplies for cash. and Cash Receipts Journal :: Customer sent in cash to settle an account receivable.

115. Accounting information systems are guided by five main principles: control, relevance, compatibility, flexibility, and cost-benefit.

116. The five basic components of accounting information systems are source documents, input devices, information processors, information storage, and output devices.

117. Special journals are used for recording and posting similar types of transactions. The most common special journals are cash receipts, cash disbursements, purchases, and sales. Special journals provide a structure for more efficient data entry and posting. In addition, the efficient division of labor adds an effective internal control procedure to the accounting system.

118. The controlling accounts are part of the general ledger. Details on individual accounts such as accounts receivable are kept in their own specific subsidiary ledger. The balance in the controlling account must match the sum of the balances in the matching subsidiary ledger. The use of subsidiary ledgers removes unnecessary details from the general ledger.

119. Technology based information systems have increased the speed, accuracy and efficiency of performing accounting tasks. Moreover, information for business decision making is provided in a more timely fashion than with manual systems. Technology based systems can also help account for complex business structures and transactions. Enterprise resource planning software can further unify complex accounting systems and support the management decision making process.

120. The segment return on assets is segment operating income divided by segment average assets. It is a measure of profitability of a segment. Users of financial statements are interested in segment information to better understand a company's activities because segments vary on profitability, and growth.

121. Posting to special journals is a three-step process: (1) individual amounts in the Other Accounts column are posted to their general ledger accounts on a regular basis, (2) individual amounts in a column that are posted in total to a controlling account at the end of a period are posted regularly to the appropriate account in the subsidiary ledger, and (3) total amounts for all columns except the Other Accounts column are posted at the end of a period to their appropriate accounts for each column.

122. The two-step procedure begins after the posting process is complete. First, a trial balance of the general ledger is prepared to confirm the equality of debits and credits. Second, schedules are prepared for each subsidiary ledger to verify that the controlling account balances (from the general ledger) equal the balances in their matching subsidiary ledgers.

123. Under the perpetual inventory system, the sales journal (and the cash receipts journal) has an additional column to record the cost of goods sold and inventory amounts for each sale. The periodic system does not record the increase in cost of goods sold and decrease in inventory at the time of sale. The purchase journal and the cash disbursements journal in the perpetual system use an Inventory column instead of a Purchases (or Purchases Discount) column.


124. To foot a column of numbers is to add it. To crossfoot is to add all Debit columns, add all credit columns and make sure that debits equal credits.?

125. Kim set up an accounting system to measure, track, and report on operations. She knew the importance of being able to read and interpret financial statements. She wanted to capture all aspects of her operations and knew she would need special journals for sales, cash receipts, purchases, and cash disbursements.

b. Latin America is the most profitable, followed by Africa and then North America.

Feedback: a.126. Answers will vary

Feedback: 127. Answers will vary



129.


3. The numbers indicate that the column totals have been posted to the accounts indicated. For instance, the 411 indicate that $6,815 was posted as a credit to the sales account.

2. Journal entries explanation:1. This is a cash receipts journal (perpetual system).Feedback:130. Answers will vary



b.

Feedback: a. 133. Answers will vary

b.




b.



b.

Feedback: a.138. Answers will vary

c. The company should focus on the segment profit and assets invested in Asia. Perhaps this is a new market and segment profit was initially expected to be lower. If segment return does not improve for Asia, the company should focus on its other markets where higher profit is generated.b. America is the most profitable, followed by Europe and then Asia.




c. The $10,000 purchase was also not posted to the subsidiary for Steve Co. The company should post the $10,000 credit to the subsidiary of Steve Co.b. The May 8 purchase from Steve Co. should also contain a debit to Inventory. Post a $10,000 entry in the Inventory Dr. column.


c.b. Debit of $20,500 - 10,300 credit = 10,200 balance in A/R control accountJason 3,000 - 0 = 3,000Amper 7,200 - 0 = 7,200Barge 3,400 - 3,400 = 0Feedback: a. Yazoo 6,900 - 6,900 =0142. Answers will vary



b. North America has the best segment return, followed by S. America, then Europe. Even though S. America is close to N. America on the segment return, management should look at operating costs to see if the gap can be closed. Europe would need to be evaluated because of the significant differences in the return. This may be a new market and a lower return is expected for a period of time. It should be closely monitored.Europe = 595/2,480 = 24.0%S. America = 2,455/7,750 = 31.7%Feedback: a. N. America = 2,320/6,590 = 35.2%144. Answers will vary

145. Cost-benefit

146. Control

147. Accounting information systems

148. Relevance

149. Compatibility

150. Flexibility


151. Source documents

152. Input devices

153. Information processors

154. Information storage

155. Output devices

156. Special

157. General journal

158. Subsidiary

159. Enterprise resource planning software.

160. Online

161. Batch

162. Computer networks

163. Business segment

164. Segment return on assets

165. Accounts receivable ledger

166. Schedule of accounts payable

167. Cost of goods sold, inventory (okay to reverse order)


ch07 Summary Category # of Questions

AACSB: Analytic 35AACSB: Communications 108AACSB: Technology 24AICPA BB: Critical Thinking 4AICPA BB: Industry 140AICPA BB: Leveraging Technology 23AICPA FN: Decision Making 119AICPA FN: Leveraging Technology 23AICPA FN: Measurement 13AICPA FN: Risk Analysis 12Blooms: Apply 19Blooms: Remember 71Blooms: Understand 77Difficulty: Easy 71Difficulty: Hard 19Difficulty: Medium 77Fundamental - Chapter 07 167Learning Objective: A1 Compute segment return on assets and use it to evaluate segment performance. 17Learning Objective: C1 Identify the principles and components of accounting information systems. 51Learning Objective: C2 Explain the goals and uses of special journals. 16Learning Objective: C3 Describe the use of controlling accounts and subsidiary ledgers. 18Learning Objective: P1 Journalize and post transactions using special journals. 49Learning Objective: P2 Prepare and prove the accuracy of subsidiary ledgers. 16Learning Objective: P3 Appendix 7AJournalize and post transactions using special journals in a periodic inventory system.

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ACG2001 Accounting Test 3 Review