Accounting Information Systems Chapter 7 Verified Test Bank - Accounting Principles 2e Test Bank by John J. Wild. DOCX document preview.

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Accounting Information Systems Chapter 7 Verified Test Bank

Chapter 07 Accounting Information Systems

MULTIPLE CHOICE QUESTIONS

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Decision makers in practice do not need a basic knowledge of how accounting information systems work because they can be relied upon to be accurate.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Control, competency, compatibility, flexibility and cost-benefit are the five basic principles of accounting information systems.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Internal controls include policies to protect company assets and achieve compliance with laws and regulations.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. The flexibility principle prescribes that an accounting information system be able to adapt to changes in the company, business environment, and needs of decision makers.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. The cost-benefit principle prescribes that the benefits from an activity in an accounting information system should outweigh the costs of that activity.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. The five basic components of accounting systems are source documents, input devices, information processors, information storage, and output devices.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Due to electronic files and Web communications, source documents are no longer required.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Industry; FN Decision Making

  1. Information processors capture information and enable its transfer to the system's information processing component.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

  1. Input devices involve converting data on source documents from written or electronic form to a form usable for the system.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

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

    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. When auditors audit financial statements and a company's controls they rely on accounting system databases.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

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

    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

Output devices include journal entries, keyboards and scanners.

    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

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

    1. True
    2. False

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

A sales journal is used to record cash sales.

    1. True
    2. False

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The purchases journal is used to record purchases of merchandise on credit.

    1. True
    2. False

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. The general journal is used for transactions not covered by special journals and for adjusting, closing, and correcting entries.
    1. True
    2. False

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

    1. True
    2. False

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. When posting from special journals, each individual debit and credit entry of similar transactions is entered in the general ledger.
    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Most transactions for merchandising businesses fall into four groups: sales, purchases, cash receipts, and cash disbursements.
    1. True
    2. False

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Because special journals are designed to suit businesses, good systems design for a business could include collapsing the sales and cash disbursements journal into one journal.
    1. True
    2. False

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

  1. A subsidiary ledger is a listing of individual accounts that contains detailed information on specific accounts in the general ledger.
    1. True
    2. False

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Two common subsidiary ledgers are cash receipts and cash disbursements.

    1. True
    2. False

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

    1. True
    2. False

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. The controlling account, Accounts Payable in the general ledger has a separate subsidiary account for each creditor in the accounts payable ledger.
    1. True
    2. False

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Equipment, inventory, and investments are other accounts that can include detailed information in a subsidiary ledger.
    1. True
    2. False

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

An advantage of online processing is that databases are updated in batches.

    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

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

    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

  1. Enterprise resource planning software packages include the programs that manage a company's vital operations such as accounting, order taking, and manufacturing.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

  1. Computer networks are links among computers giving different users and different computers access to common databases, programs, and hardware.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

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

    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

  1. Most companies use online processing instead of batch processing because online processing immediately updates databases.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

  1. The SAP enterprise-resource planning software is being used to help direct the operations of many of the world's largest companies.
    1. True
    2. False

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

  1. 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.
    1. True
    2. False

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Risk Analysis

  1. Segment return on assets is calculated by dividing segment average assets by segment operating income.
    1. True
    2. False

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Risk Analysis

  1. External users of financial statements are generally interested in segment information to understand a company's business activities.
    1. True
    2. False

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Risk Analysis

  1. Segment information is not helpful to investors for evaluating a company's profitability, risk, or growth.
    1. True
    2. False

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Risk Analysis

A columnar journal is any journal with only one column.

    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Individual transactions in the purchases journal are regularly posted to creditor accounts in the accounts payable ledger.
    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. 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.
    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Each transaction recorded in the sales journal yields a debit to Accounts Receivable and a credit to Sales.
    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. 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.
    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. A procedure called direct posting of sales invoices involves posting sales directly to the customer accounts in the accounts receivable ledger, making a period end journal entry, and avoiding the use of the sales journal.
    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Account balances in the general ledger and the subsidiary ledgers should be proved for accuracy after posting is complete.
    1. True
    2. False

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

    1. True
    2. False

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. If the total balance of the accounts payable ledger equals the total of the controlling Accounts Payable account, then the accounts are presumed to be correct.
    1. True
    2. False

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. A trial balance is completed after posting but before proving the subsidiary ledger by preparing a schedule of the controlling account.
    1. True
    2. False

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. A company using the perpetual inventory system records the increase in cost of goods sold and decrease in inventory at the time of each sale in the sales journal.
    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The purchases journal is typically used to record only purchases of inventory.

    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. The sales journals of companies using the perpetual and periodic inventory systems differ in that under the perpetual system a column is used to record cost of goods sold and inventory amounts for each sale but not the periodic system.
    1. True
    2. False

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Which of the following statements regarding accounting information systems is not true?

    1. Accounting information systems communicate information to business decision makers.
    2. Accounting information systems are useful to effective decision making.
    3. Accounting information systems organize data in useful forms.
    4. Accounting information systems are not subject to internal control policies.
    5. Accounting information systems collect and process data from transactions and events.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Which of the following statements is not true regarding internal control procedures?

    1. Internal control procedures include methods to achieve compliance with laws and regulations.
    2. Internal control procedures direct operations toward common goals.
    3. Internal control procedures are designed to safeguard company assets.
    4. Internal control procedures are not affected by the cost-benefit principle.
    5. Internal control procedures are designed to ensure reliable financial reports.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The control principle for accounting information systems requires that the:

    1. System report useful, understandable, timely, and pertinent information for effective decision making.
    2. System be able to adjust to changes in the company, business environment, and needs of decision makers.
    3. System conforms to a company's activities, personnel, and structure.
    4. Benefits from an activity outweigh the costs of the activity.
    5. System must have methods and procedures allowing managers to control and monitor business activities.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The flexibility principle of accounting information systems prescribes that the:

    1. System conforms to a company's activities, personnel, and structure.
    2. System aid managers in controlling and monitoring business activities.
    3. System report useful, understandable, timely, and pertinent information for effective decision making.
    4. Benefits from an activity in the system outweigh the costs of the activity.
    5. System be able to adapt to changes in the company, business environment, and needs of decision makers.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Which of the following accounting principles prescribes that an accounting information system report useful, understandable, timely, and pertinent information for effective decision-making?
    1. Flexibility principle.
    2. Relevance principle.
    3. Compatibility principle.
    4. Cost-Benefit principle.
    5. Control principle.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The five fundamental principles of accounting information systems are:

    1. Historical cost, relevance, compatibility, flexibility, and cost-benefit.
    2. Control, relevance, compatibility, flexibility, and safety.
    3. Historical cost, relevance, compatibility, timeliness, and cost-benefit.
    4. Control, accountability, relevance, compatibility, and flexibility.
    5. Control, relevance, compatibility, flexibility, and cost-benefit.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Which of the following statements regarding accounting information systems is not true?

    1. Accounting information systems cannot improve on a company's competitive edge.
    2. Accounting information systems are designed to capture information about a company's transactions.
    3. Accounting information systems are more important than ever to decision makers.
    4. Accounting information systems consist of people, records, methods, and equipment.
    5. Accounting information systems are designed to provide output including financial, managerial, and tax reports.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

    1. Source documents.
    2. Information storage.
    3. Warehouses.
    4. Information processors.
    5. Output devices.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Source documents:

    1. Convert information to the system's processing component.
    2. Are input devices.
    3. Cannot be electronic files or web communications.
    4. Store processed information for future use.
    5. Provide the basic information processed by an accounting system.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Input devices include:

    1. Scanners.
    2. Software.
    3. Information processors.
    4. Ledgers.
    5. Printers.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Information storage databases:

    1. Capture information from source documents.
    2. Are relied on by auditors of the financial statements.
    3. Need not be accessible once data is processed.
    4. Should not be cloud based.
    5. Eliminate the need for professional judgment.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Which of the following is not an output device?

    1. Web communications.
    2. Printers.
    3. Bar code readers.
    4. Projectors.
    5. Monitors.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Information processors are systems that:

    1. Keep data in an accessible form.
    2. Interpret, transform, and summarize information for use in analysis and reporting.
    3. Capture information from source documents.
    4. Eliminate the need for professional judgment due to their accuracy.
    5. Are the means to make information available to users.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Which of the following is not a special journal:

    1. Cash disbursements journal.
    2. General journal.
    3. Purchases journal.
    4. Cash receipts journal.
    5. Sales journal.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The sales journal is used for recording:

    1. Cash sales.
    2. Credit sales.
    3. Cash purchases.
    4. Credit purchases.
    5. Cash receipts.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The purchases journal is used for recording:

    1. Credit sales.
    2. Cash purchases.
    3. Cash sales.
    4. Credit purchases.
    5. Cash disbursements.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

A journal that is used to record and post transactions of a similar type is a(n):

    1. Special journal.
    2. General journal.
    3. Perpetual journal.
    4. Columnar journal.
    5. All-purpose journal.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. When a company uses special journals, the general journal is used to record selected transactions and events including:
    1. Credit purchases.
    2. Closing entries.
    3. Sales on credit.
    4. Credit sales.
    5. Cash payments.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Which of the following is not a feature of special journals?

    1. They produce an efficient division of labor.
    2. They eliminate the need for a general journal.
    3. Good system design could collapse sales and cash receipts into one journal to better suit a business.
    4. They allow posting of amounts as column totals rather than as individual amounts.
    5. They are efficient tools in helping journalize and post transactions.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. A record that contains detailed information on specific accounts with a common characteristic and is support for a controlling account is a(n):
    1. All-purpose ledger.
    2. Subsidiary ledger.
    3. Special ledger.
    4. General ledger.
    5. Column balance ledger.

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

A subsidiary ledger:

    1. Is a listing of all of the accounts of a business.
    2. Is also called a general ledger.
    3. Is a listing of individual accounts and amounts with a common characteristic.
    4. Is also called a special journal.
    5. Includes transactions not covered by special journals.

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. A subsidiary ledger that contains a separate account for each supplier (creditor) to the company is a(n):
    1. Controlling account.
    2. Special journal.
    3. Accounts receivable ledger.
    4. General ledger.
    5. Accounts payable ledger.

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

An accounts receivable ledger is a:

    1. List of the separate accounts that show the balances outstanding from credit customers.
    2. Book of original entry that is designed and used for recording only sales on credit.
    3. Ledger that contains all financial statement accounts of a business.
    4. Subsidiary ledger that contains a separate account for each party that grants both short-term and long-term credit on account to the company.
    5. Subsidiary ledger that contains an account for each supplier (creditor).

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Assume that a company uses special journals for sales, purchases, cash receipts, and cash disbursements. A sales return for credit on account would be recorded in the:
    1. Direct posting journal.
    2. Cash disbursements journal.
    3. Cash receipts journal.
    4. General journal.
    5. Sales journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

An accounts payable ledger:

    1. Contains a separate account for each creditor (supplier) to the company.
    2. Is a book of original entry designed and used for recording only a specified type of transaction.
    3. Contains the financial statement accounts of a business.
    4. Contains an account for each credit customer.
    5. Lists the balances of selected accounts that are added to show the total amount of the significant long-term creditors outstanding.

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The Accounts Payable controlling account:

    1. Equals the sum of all balances of supplier accounts.
    2. Reduces the number of entries in the general journals.
    3. Increases the number of columns in the journals.
    4. Stores the transaction data of individual supplies.
    5. Is not included in a company's chart of accounts.

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Subsidiary ledgers do all of the following except:

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

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The accounts receivable ledger:

    1. Is also the controlling account.
    2. Stores transaction data for individual creditors.
    3. Is a substitute for the sales journal.
    4. Is a substitute for the cash receipts journal.
    5. Stores transaction data for individual customers.

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Examples of other subsidiary ledgers besides those for accounts receivable and accounts payable may include all of the following except:
    1. Inventory.
    2. Equipment.
    3. Payroll.
    4. Investments.
    5. Cash.

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Chandler Company sold merchandise on credit to Jamie Morgan for $700 and the cost of the merchandise was $290. Chandler would record this sale in the:
    1. General journal.
    2. Accounts Receivable controlling account.
    3. General ledger.
    4. Sales journal.
    5. Cash receipts journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Chandler Company purchased merchandise on credit from Lighting Supply for $5,600. Chandler would record this sale in the:
    1. Purchases journal.
    2. Cash receipts journal.
    3. General journal.
    4. Cash disbursements journal.
    5. Accounts Payable controlling account.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Doughton Furniture Company purchased merchandise on credit from Furniture Supply for $8,000. Two days later Doughton returned $2,000 of the merchandise due to damage. Doughton would record the return of merchandise in the:
    1. Cash disbursements journal.
    2. General journal.
    3. Purchases journal.
    4. Accounts Payable controlling account.
    5. Cash receipts journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Doughton Furniture Company purchased merchandise on credit from Furniture Supply for $8,000. Two days later Doughton returned $2,000 of the merchandise due to damage. When Doughton pays for the merchandise minus the return, it would record the payment in the:
    1. General journal.
    2. Purchases journal.
    3. Cash disbursements journal.
    4. Cash receipts journal.
    5. Accounts Payable controlling account.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

Enterprise-resource planning software:

    1. Uses batch processing of business information.
    2. Is another name for spreadsheet programs.
    3. Refers to programs that help manage a company's vital operations.
    4. Is substantially declining in use.
    5. Is another name for database programs.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

  1. An approach that enters and processes data into the accounting system as soon as source documents are available is called:
    1. Batch processing.
    2. Web communications.
    3. Computer programming.
    4. Online processing.
    5. Date storage.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

Which of the following is not true about enterprise resource planning (ERP) software:

    1. ERP can be designed to link every part of a company's operations.
    2. ERP cannot be used to share data with customers and suppliers.
    3. ERP can include programs that extend from order taking to manufacturing to accounting.
    4. ERP can speed up business decision making and help reduce costs.
    5. ERP refers to programs that help manage a company's vital operations.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Technology

AICPA: BB Leveraging Technology; FN Leveraging Technology

A business segment is part of a company that:

    1. Requires subsidiary ledgers.
    2. Cannot report its results separately.
    3. Requires only internal reporting.
    4. Requires special journals.
    5. Is separately identified by its products, services, or geographic market.

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Risk Analysis

  1. Alani's Hawaiian segment had revenues of $2,075 million, operating income of $1,500 million, and average assets of $1,450 million. The Hawaiian segment return on assets is:

A) 138.3% B) 69.9% C) 96.7% D) 72.3% E) 103.4%

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Risk Analysis

The segment return on assets:

    1. Reflects on the profitability of a segment.
    2. Is difficult to calculate because companies with traded stock are not required to report segment information.
    3. Is applicable whether segments earn profits or losses.
    4. Is calculated as segment sales divided by segment average assets.
    5. Is calculated as segment average assets divided by segment operating income.

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Risk Analysis

When posting the sales journal's activity at the end of the month, its totals are:

    1. Debited to Sales and credited to Accounts Receivable.
    2. Debited to Accounts Receivable and credited to Sales.
    3. Debited to Accounts Receivable and credited to Cash.
    4. Debited to Cash and credited to Accounts Receivable.
    5. Debited to Cash and credited to Sales.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

A list of all the accounts in the accounts receivable ledger with their balances and the total is a:

    1. Schedule of accounts receivable.
    2. Controlling account.
    3. Subsidiary ledger.
    4. Special journal.
    5. Schedule of accounts.

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

The Accounts Payable account in the general ledger is:

    1. The subsidiary account to the purchases journal.
    2. A controlling account for the subsidiary accounts payable ledger.
    3. Part of a special journal.
    4. The account that controls the purchases journal.
    5. Part of a subsidiary ledger.

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

    1. The sum of the supplier account balances does not equal the general ledger Accounts Payable controlling account balance.
    2. The sum of the accounts receivable ledger does not equal the balance in the sales journal.
    3. The sum of the accounts receivable ledger does not equal the balance in the Sales account.
    4. The sum of the supplier account balances does not equal the total in the purchases journal.
    5. The balance in the sales journal does not equal the Accounts Receivable account balance.

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Assume that a company using a purchases journal made an error in totaling the journal's accounts payable column. The error should be discovered:
    1. When the creditors receive their payments.
    2. When the sum of the vendor accounts does not equal the balance in the Purchases journal.
    3. When the purchases journal is posted to the general ledger.
    4. When the financial statements are prepared.
    5. When the total of the schedule of accounts payable is compared with the balance of the Accounts Payable account.

Learning Objective: 07-P1 Journalize and post transactions using special journals.; 07-P2 Prepare and prove the accuracy of subsidiary ledgers.

Bloom's: Understand AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

    1. The sales tax payable column is used under the perpetual system but not the periodic.
    2. The column for recording cash is used under the perpetual system but not the periodic.
    3. The sales tax receivable column is used under the perpetual system but not the periodic.
    4. The perpetual system has a column to record cost of goods sold but the periodic system does not.
    5. The accounts receivable column is used under the perpetual system but not the periodic.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. The accounting principle that prescribes an accounting information system conform with a company's activities, personnel, and structure is the:
    1. Control principle.
    2. Compatibility principle.
    3. Cost-Benefit principle.
    4. Flexibility principle.
    5. Relevance principle.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

    1. Source documents can include Web communications.
    2. Source documents can be paper or electronic files.
    3. Source documents provide the basic information processed by an accounting system.
    4. Source documents should not be sent directly from a company's system to its customers or suppliers.
    5. Source documents include invoices, cash register files, and employee earnings records.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

Which of the following statements regarding input devices is not true?

    1. Input devices include keyboards and scanners.
    2. Input devices capture information from source documents and enable its transfer to the system's information processing component.
    3. Input devices make accounting system information available to users.
    4. Input devices convert data on source documents from written form to a form usable for the system.
    5. Input devices include journal entries.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

A company would use which of the following journals to record cash payments?

    1. General journal.
    2. Sales journal.
    3. Cash disbursements journal.
    4. Cash receipts journal.
    5. Purchases journal.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

Which of the following journals would a company use to record a merchandise return?

    1. General journal.
    2. Purchases journal.
    3. Cash disbursements journal.
    4. Cash receipts journal.
    5. Sales journal.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Which of the following journals would a company use to record cash collections from customers, net of discounts taken?
    1. Cash receipts journal.
    2. General journal.
    3. Cash disbursements journal.
    4. Sales journal.
    5. Purchases journal.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Which of the following journals would a company use to record period-end adjusting entries to accrue revenues?
    1. Cash disbursements journal.
    2. Purchases journal.
    3. Cash receipts journal.
    4. Sales journal.
    5. General journal.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. For a retailer required to collect sales taxes from customers, all of the following adaptations would be made to the sales journal except:
    1. A Sales Taxes Payable debit column would be added.
    2. There would be a separate Sales credit column.
    3. Column totals would continue to be posted as usual.
    4. A Sales Taxes Payable credit column would be added.
    5. There would be a separate Accounts Receivable debit column.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. The process of adding the Debit column totals, then the credit column totals of a journal and comparing the two sums for equality is an example of:
    1. Reconciling.
    2. Journalizing.
    3. Footing.
    4. Crossfooting.
    5. Posting.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. A company borrowed $80,000 from a bank by signing a long-term note payable. The journal the transaction would be recorded in is the:
    1. Sales journal.
    2. Purchases journal.
    3. General journal.
    4. Cash disbursements journal.
    5. Cash receipts journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. A company makes a payment of $5,000 on a long-term note payable. The journal the transaction would be recorded in is the:
    1. Cash receipts journal.
    2. General journal.
    3. Sales journal.
    4. Cash disbursements journal.
    5. Purchases journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. A company makes a cash sale of $24,000. The cost of the merchandise is $13,000. Identify the journal the transaction would be recorded in:
    1. Cash receipts journal.
    2. Purchase journal.
    3. General journal.
    4. Sales journal.
    5. Cash disbursements journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. A company sells merchandise on credit for $6,000. The merchandise cost is $3,400. The journal that the transaction would be recorded in is the:
    1. Cash disbursements journal.
    2. Sales journal.
    3. Purchases journal.
    4. Cash receipts journal.
    5. General journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. If a company purchases $15,200 of merchandise on credit, which journal will the transaction be recorded in?
    1. Purchases journal.
    2. General journal.
    3. Cash disbursements journal.
    4. Cash receipts journal.
    5. Sales journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Flavor Ice Cream received a payment of $7,800 from a credit customer within the discount period. Identify the journal the transaction would be recorded in:
    1. Purchases journal.
    2. Cash disbursements journal.
    3. Cash receipts journal.
    4. General journal.
    5. Sales journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. If a company issues a check for $2,900 in payment of merchandise, identify the journal the transaction would be recorded in:
    1. Cash disbursements journal.
    2. Cash receipts journal.
    3. Purchases journal.
    4. General journal.
    5. Sales journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Barrier Scuba Equipment purchased supplies costing $3,000 on credit. Identify the journal the transaction would be recorded in:
    1. General journal.
    2. Cash receipts journal.
    3. Cash disbursements journal.
    4. Purchases journal.
    5. Sales journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. If a company issues a check for $2,750 in payment of the salaries expense for the last half of the month, the transaction will be recorded in which journal?
    1. Purchases journal.
    2. Sales journal.
    3. General journal.
    4. Cash receipts journal.
    5. Cash disbursements journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. A company that reports segment information had average total assets of $1,522,450 and total net income of $590,700. Segment A had average total assets of $927,800 and segment operating income of $298,300. Segment B had average assets of $594,650 and segment operating income of

$292,400. The segment return on assets for Segment A is:

A) 60.9%. B) 38.8%. C) 32.2%. D) 49.2%. E) 50.5%.

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. A company that reports segment information had average total assets of $1,522,450 and total net income of $590,700. Segment A had average total assets of $927,800 and segment operating income of $298,300. Segment B had average assets of $594,650 and segment operating income of

$292,400. The segment return on assets for Segment B is:

A) 60.9%. B) 50.5%. C) 32.2%. D) 38.8%. E) 49.2%.

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Apply

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. 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 sales transaction in its sales journal, Maxie's would enter:
    1. $1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cost of Goods Sold Dr./Inventory Cr. column.
    2. $2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Cost of Goods Sold Dr./Inventory Cr. column.
    3. $2,600 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cash Cr. column.
    4. $2,600 in the Accounts Receivable Dr./Sales Cr. column and $1,700 in the Accounts Payable Dr./Purchases Cr. column.
    5. $1,700 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Other Accounts Dr. column.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. 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:
    1. $2,600 in the Cash Dr. column. $2,600 in the Sales Cr. column, and $1,700 in the Cost of Goods Sold Dr./Inventory Cr. column.
    2. $2,574 in the Cash Dr. column, $26 in the Sales Discount Dr. column and $2,600 in the Accounts Receivable Cr. column.
    3. $2,574 in the Cash Dr. column and $2,574 in the Accounts Receivable Cr. column.
    4. $2,600 in the Cash Dr. column and $2,600 in the Accounts Receivable Cr. column.
    5. $2,600 in the Accounts Receivable Dr./Sales Cr. column and $2,600 in the Cash Cr. column.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. 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:
    1. $860 in the Cash Dr. column; $860 in the Sales Cr. column; and $370 in the Cost of Goods Sold Dr./Inventory Cr. column.
    2. $860 in the Cash Dr. column; $860 in the Sales Cr. column; and $370 in the Other Accounts Cr. column.
    3. $370 in the Cash Dr. column and $370 in the Accounts Receivable Cr. column.
    4. $860 in the Accounts Receivable Dr. column, $860 in the Cash Cr. column; and $370 in the Cost of Goods Sold Dr./Inventory Cr. column.
    5. $860 in the Cash Dr. column and $860 in the Accounts Receivable Cr. column.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. 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:

    1. $14,994 in the Inventory Dr. column and $14,994 in the Accounts Payable Cr. column.
    2. $15,300 in the Accounts Payable Cr. column and $15,300 in the Inventory Dr. column.
    3. $15,300 in the Accounts Payable Cr. column and $15,300 in the Supplies Dr. column.
    4. $15,300 in the Other Accounts Dr. column and $15,000 in the Inventory Cr. column.
    5. $15,300 in the Inventory Dr. column, $14,994 in the Accounts Payable Cr. column, and $306 in the Purchase Discount Cr. column.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. 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:

    1. $15,300 in the Accounts Payable Dr. column; $14,994 in the Cash Cr. column; and $306 in the Inventory Cr. column.
    2. $14,994 in the Accounts Payable Dr. column and $14,994 in the Cash Cr. column.
    3. $15,300 in the Cash Cr. column and $15,300 in the Accounts Payable Dr. column.
    4. $15,300 in the Cash Cr. column and $15,300 in the Inventory Dr. column.
    5. $15,300 in the Inventory Cr. column; $14,994 in the Accounts Payable Dr. column; and $306 in the Inventory Cr. column.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  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:
    1. Debit Cash $1,100 and credit Inventory $1,100 in the general journal.
    2. $1,100 in the Accounts Payable Dr. column and $1,100 in the Cash Cr. column of the cash disbursements journal.
    3. $1,100 in the Accounts Payable Cr. column and $1,100 in the Inventory Dr. column of the purchases journal.
    4. $1,100 in the Cash Cr. column and $1,100 in the Inventory Cr. column in the cash disbursements journal.
    5. Debit Accounts Payable $1,100 and credit Inventory $1,100 in the general journal.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

SHORT ANSWER QUESTIONS

  1. Identify the accounting information system principle indicated in letters a-e that applies to each of the situations below by entering the appropriate letter next to the statement.
  2. International Company's accounting information system can be improved markedly for a cost of about $10,000,000 and the company intends to complete the upgrade because the benefits outweigh this cost.
  3. International Company has world-wide operations that must handle thousands of different products, so the accounting information system is fairly complex to conform to its activities, personnel, and structure.
  4. International Company has designed its accounting information system so that key managers can obtain the information they need to make decisions relating to new products, sales, and controlling costs.
  5. International Company's accounting information system has policies to ensure that financial reports will be reliable, assets are safeguarded, and relevant laws and regulations are complied with.
  6. International Company has designed its accounting information system to be adaptable to changes in technology, the business environment, and the needs of decision makers.

Explanation:

Answer: Flexibility

5

Compatibility

2

Control

4

Cost-benefit

1

Relevance

3

Diff: 2

Topic: System Principles

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Enter the letter of the following terms on the line next to the appropriate definition of each.
  2. The component of an accounting system that is the means to take information from an accounting system and make it available to users.
  3. The means of collecting and processing data from transactions and events, organizing them into useful reports, and communicating results to decision makers.
  4. A record of the separate accounts of each supplier that supports its general ledger controlling account.
  5. The component of an accounting system that keeps data in a form accessible to information processors.
  6. The special journal used to record all receipts of cash.
  7. The special journal that is used to record all cash payments.
  8. The component of an accounting system that captures source document information and enables

its transfer to the information processor.

  1. An information system principle that prescribes that an accounting system have methods and procedures allowing managers to control and monitor business activities.
  2. The special journal used to record all purchases made on account.
  3. An information system principle requiring that an accounting system report useful, understandable, timely, and pertinent information for decision making.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems.; 07-C2 Explain the goals and uses of special journals.; 07-C3 Describe the use of controlling accounts and subsidiary ledgers.

Bloom's: Understand AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. Match the following accounting system components a-e with their related items 1-10 by placing the correct letter next to each item.
  2. Source documents
  3. Input devices
  4. Information processor
  5. Information storage
  6. 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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. Match the following terms with the appropriate definitions.
  2. Sales journal
  3. Controlling account
  4. Accounts receivable ledger
  5. Cash disbursements journal
  6. Cash receipts journal
  7. Schedule of accounts payable
  8. Segment return on assets
  9. Columnar journal
  10. Special journal
  11. 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.

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance.; 07-C3 Describe the use of controlling accounts and subsidiary ledgers.; 07-P1 Journalize and post transactions using special journals.

Bloom's: Understand AACSB: Communication

AICPA: BB Industry; FN Decision Making

  1. A company entered into the following transactions. Match each transaction with the appropriate journal in which it should be recorded.
  2. Sales journal
  3. Purchases journal
  4. Cash receipts journal
  5. Cash disbursements journal
  6. 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.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Analytical Thinking

AICPA: BB Industry; FN Decision Making

  1. A company entered into the following transactions. For each transaction, indicate the appropriate journal in which it should be recorded.
  2. Sales Journal
  3. Purchases Journal
  4. Cash Receipts Journal
  5. Cash Disbursements Journal
  6. 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.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Understand

AACSB: Communication

AICPA: BB Industry; FN Decision Making

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Remember

AACSB: Communication

AICPA: BB Industry; FN Decision Making

ESSAY QUESTIONS

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Understand

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

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Understand

Discuss how technology based information systems affect accounting.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Technology

AACSB: BB Leveraging Technology; FN Leveraging Technology AICPA: Understand

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

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Risk Analysis AICPA: Understand

Describe the posting process for special journals.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Understand

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

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Understand

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

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Understand

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

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Understand

  1. Alex Reagent, owner of Delectable Candy Company, understands that accounting systems are important for success. Explain how Alex can use the accounting system to assess business operations.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Understand

  1. The following information is available for some of Branson's segments (all amounts are in millions):

North America

Asia

Central America

Segment sales

$5,190

$750

$2,350

Segment operating income

1,494

273

1,127

Segment average assets

4,700

541

1,382

  1. Determine the segment return on assets for each geographic segment.
  2. Comment on the results. How do the segments compare with respect to profitability?

Segment

Segment return on assets = Segment operating

income/Segment average assets

North America

$1,494/$4,700 = 31.8%

Asia

$273/$541 = 50.5%

Central America

$1,127/$1,382 = 81.5%

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Analytical Thinking

AACSB: BB Critical Thinking; FN Risk Analysis AICPA: Apply

  1. The Stapleton Company uses special journals for sales, purchases, cash receipts, cash disbursements, and uses a general journal. They operate with a perpetual inventory system. The following transactions occurred during the current month of September:

Sep.

1

Paid $2,400 cash for monthly rent to Wabash Properties, Check No. 1630.

4

Purchased merchandise on credit for $1,800 from Bell Co., terms 2/10, n/30.

Invoice dated September 4.

8

Sold merchandise on credit for $4,300 to Andrews Co., Invoice No. 413. The cost

of the goods sold is $2,750.

10

Sold merchandise for $1,500 cash to Lacey Corp., Invoice No. 414. The cost of

the good sold is $720.

13

Paid amount owed to Bell Co. from September 4 purchase, Check No. 1631.

17

Collected $4,300 cash from the Andrews Co. for merchandise sold on September

8.

24

Sold merchandise on credit for $4,500 to Frasier Corp., Invoice No. 415. The cost

of goods sold is $2,600.

31

Purchased office supplies for $3,055 from Maxwell Corp., Check No. 1632.

Record the above transactions into the appropriate journals that follow.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. The Tigre Company uses special journals for sales, purchases, cash receipts, cash disbursements, and uses a general journal. They operate with a perpetual inventory system. Record the following transactions related to purchases and cash payments that occurred during the current month of June:

June

1

Paid $800 cash for monthly rent to Frontier Properties, Check No. 2116.

3

Purchased merchandise on credit for $2,400 from Whistle Co., terms 2/10, n/30. Invoice dated

June 3.

5

Returned defective merchandise with a cost of $300 to Whistle from the June 3 purchase.

8

Purchased equipment on credit from Jackson Co. for $6,700, terms 1/10, n/30.

13

Paid amount owed to Whistle Co. from June 3 purchase with Check No. 2117.

30

Purchased office supplies for $1,075 from Paperly Corp., Check No. 2118.

Record the above transactions into the appropriate journals shown below.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. The Saginaw Company uses special journals for sales, purchases, cash receipts, cash disbursements, and uses a general journal. They operate with a perpetual inventory system. Record the following transactions related to sales and cash receipts that occurred during the month of August:

Aug.

3

Sold $8,700 merchandise to Kline Co., terms 2/10, n/30, Invoice No. 826. The cost of the goods sold was $3,900.

6

Sold merchandise on credit for $3,500 to Mentor Corp., Invoice No. 827. The cost of the good sold is $1,750.

10

Mentor Corp. returned $750 of merchandise from the Aug. 6 sale. The cost of the merchandise was $330. The merchandise was restored to inventory.

12

Collected amount due from the Kline Co. for merchandise sold on Aug. 3.

31

Collected on the Aug. 6 sale to Mentor Corp., net of the return.

Record the above transactions into the appropriate journals that follow.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. 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 February:

73

Feb.

3

Sold merchandise for $5,000 to the North Corp. on credit, Invoice No. 785. Cost of the goods sold is $2,900.

6

Sold a piece of land for $25,000 cash. The land was originally purchased for

6

Sold a piece of land for $25,000 cash. The land was originally purchased for

$25,000.

11

Purchased supplies from Office Mate for $240 Cash. Check No. 2316.

15

Issued a credit memo for $850 to North Corp. for returned merchandise. Cost of

the goods returned is $410.

21

Returned $130 of merchandise purchased from Shifton Corp. for credit on

account.

22

Paid cash to Rentals Inc. for monthly rent of $3,500. Check No. 2317.

31

Recorded depreciation on equipment of $7,000.

Record these transactions in the appropriate journals that follow.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. Salem 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 July:

July

1

Purchased merchandise for cash from Van Co. $4,400, Check No. 1033.

2

Purchased office equipment from Bat Co. on credit, $6,700, terms n/60. Invoice

dated July 1.

6

Paid Badger, Inc., $3,900 cash for previous purchases on account, which is net of

a $100 discount, Check No. 1034.

9

Purchased merchandise from Aztec, Inc. on credit, terms 1/15, n/30, $23,600.

Invoice dated July 8.

10

Paid Bat Co. cash for May 2 purchase, Check No. 1035.

18

Purchased office supplies on credit $130, terms net EOM from Roberts, Co.,

Invoice dated July 17.

Record these transactions in the following journals.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. The following special journal is taken from a merchandising company that uses the perpetual inventory system:
  2. What is the name of the journal shown above?
  3. Write an explanation for each entry in this journal.
  4. What do the numbers in parentheses at the bottom of the journal indicate?

a.

February 2:

Recorded receipt of a payment from H. Jones on a credit sale

with a 2% discount. Payment was received within the discount period.

b

.

February 14:

Recorded receipt of proceeds on a note payable.

c.

February 17:

Recorded receipt of proceeds from cash sales; cost of the sale is

$680.

d

.

February 22:

Recorded receipt of proceeds from the sale of equipment.

e.

February 28:

Recorded receipt of a payment from credit customer M. Simms;

no discount given.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. 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.
  2. Sold merchandise for cash. ________
  3. Collected on a customer's account. ________
  4. Paid the monthly electric bill. ________
  5. Purchased office supplies on credit. ________
  6. Sold merchandise on credit. ________
  7. Paid a creditor on account. ________
  8. Received returned merchandise for credit. ________
  9. Purchased merchandise on account. ________
  10. Received proceeds from a note issued to the bank. ________
  11. Returned damaged merchandise to the supplier. ________

a.

Cash receipts

b.

Cash receipts

c.

Cash disbursements

d.

Purchases

e.

Sales

f.

Cash disbursements

g.

General

h.

Purchases

i.

Cash receipts

j.

General

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Decision Making AICPA: Understand

  1. Gershwin Company uses four special journals: purchases, sales, cash receipts, and cash disbursements. The following sales and cash collections transactions were incurred during October:

79

Oct.

1

Sold merchandise on credit to Lake Co. for $3,000, terms 2/15, n/30, Invoice No. 245. Cost of the goods sold is $1,320.

5

Sold merchandise on credit to Sigma Corp. for $2,000, terms, 2/10, n/30, Invoice No. 246. Cost of the goods sold is $740.

10

Accepted merchandise returned by Lake Co. from October 1 sale. Issued credit memorandum for $500. Cost of the goods returned is $290.

13

Received cash payment from Lake Co. for October 1 sale.

19

Received cash payment in full from Sigma Corp. for the October 5 sale.

19

Received cash payment in full from Sigma Corp. for the October 5 sale.

28

Recorded cash sales for the month, $8,000. Cost of the goods sold is $4,220.

Record these transactions in the appropriate special journals below.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

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

Aug.

1

Purchased merchandise from Able Co. for $2,000, terms 2/10, n/30. Invoice dated

August 1.

7

Paid salaries accrued on July 31, $2,100 to manager Ms. Krenz, Check No. 756.

9

Returned merchandise costing $200 to Able Co. from August 1 purchase.

11

Paid Able Co. for the August 1 purchase, Check No. 757.

28

Purchased office supplies from Mercantile Co. on credit, terms 1/10, n/EOM for

$335.

29

Paid cash to Incite Telephone Co. for monthly telephone bill $250, Check No.758.

Record these transactions in the appropriate special journals below.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. Trimble Company began business on July 1. They use the perpetual inventory method. The following transactions involving purchases and cash disbursements occurred during July.

July

4

Purchased $25,000 of merchandise inventory on credit from the Fort City

Company, terms 2/10, n/30. Invoice dated July 1.

July

5

Purchased $12,000 of merchandise inventory on credit from the Phoenix

Company, terms 2/10, n/30. Invoice dated July 2.

July

8

Purchased $3,000 of office supplies for cash from Gleason Co. Check no.

1267.

July

10

Purchased $36,000 of office equipment on credit from Office Minder,

terms n/60. Invoice dated July 3.

July

13

Paid the amount due for the merchandise purchased from Fort City

Company. Check no. 1268.

July

22

Purchased $14,500 of merchandise inventory for cash from the Shilling

Co. Check no. 1269.

  1. Use the purchases journal and the cash disbursements journal provided to record these transactions.
  2. Prepare a schedule of accounts payable as of July 31. There were no accounts payable on July 1.

Learning Objective: 07-P1 Journalize and post transactions using special journals.; 07-P2 Prepare and prove the accuracy of subsidiary ledgers.

Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. The Moonlight Company completed the following sales and cash receipts transactions during November. The Moonlight Company uses the perpetual inventory system.

84

Nov. 1

Sold merchandise for $6,700 on credit to the Three Rivers Co., terms 2/10, n/30. Invoice no. 1455. Cost of the merchandise sold is $3,600.

Nov. 1

Sold merchandise for $3,400 on credit to the Milwaukee Co., terms 2/10, n/30. Invoice no. 1456. Cost of the merchandise sold is $1,800.

Nov. 2

Sold merchandise for $590 for cash to the Madison Co. Invoice no. 1457. Cost of the merchandise sold is $300.

Nov. 3

Borrowed $10,000 from Lake City Bank on a long-term note payable.

Nov. 3

Borrowed $10,000 from Lake City Bank on a long-term note payable.

Nov. 3

Sold merchandise for $7,200 on credit to the Pare Co., terms 2/10, n/30.

Invoice no. 1458. Cost of the merchandise sold is $4,000.

Nov. 5

Received the amount due from the Three Rivers Co. from the sale on

November 1.

Nov. 6

Sold merchandise on credit for $950 to the Manitowok Co., terms 2/10, n/30.

Invoice No. 1459. Cost of the merchandise is $500.

Nov. 10

Received the amount due from the Milwakee Co. from the sale on November

1.

  1. Use the sales journal and the cash receipts journal to record these transactions.
  2. Prepare a schedule of accounts receivable as of November 10. There was no accounts receivable balance at November 1.

Learning Objective: 07-P1 Journalize and post transactions using special journals.; 07-P2 Prepare and prove the accuracy of subsidiary ledgers.

Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. Climbers 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.

Learning Objective: 07-P1 Journalize and post transactions using special journals.; 07-P2 Prepare and prove the accuracy of subsidiary ledgers.

Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. The Skyview Company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal. They use the periodic inventory method. The following sales and cash collections transactions occurred during the month of December:

Dec.

4

Sold merchandise on credit for $3,300 to the B&A Co., Invoice No. 313.

10

Sold merchandise for $500 cash to CAR Corp., Invoice 314.

13

Collected $3,300 from the B&A Co. for merchandise sold on December 4.

24

Sold merchandise on credit for $4,500 to Cowl Corp., Invoice No. 315.

Record these transactions using the journals below.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. The Skyview Company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal. They use the periodic inventory method. The following purchase and cash payments transactions occurred during the month of December:

90

Dec

8

Purchased merchandise on credit for $1,800 from the Wexler Co., terms 2/10,

n/30. Invoice dated December 8.

17

Paid amount owed to Wexler Co. from December 8 purchase, Check No. 1011.

17

Paid amount owed to Wexler Co. from December 8 purchase, Check No. 1011.

27

Paid $400 cash for monthly rent to Iowa Properties, Check No. 1012.

31

Purchased equipment for $3,055 from Gore Corp., Check No. 1013.

Record these transactions using the journals below.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. Daisy 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.

.

May 2

Purchased $25,000 of merchandise inventory on credit from the Farthing

Company, terms 2/10, n/30. Invoice dated May 1.

May 3

Purchased $12,000 of merchandise inventory on credit from the Hacks Company,

terms 2/10, n/30. Invoice dated May 2.

May 3

Purchased $3,000 of office supplies for cash from Liston Co. Check no. 1267

May.

May 4

Purchased $36,000 of office equipment on credit from Superior Office, terms n/60

Invoice dated May 3.

May 6

Paid the amount due for the merchandise purchased from Farthing Company.

Check no. 1268.

May 6

Purchased $14,500 of merchandise inventory for cash from the Hills Co.

Check no. 1269.

  1. Use the purchases journal and the cash disbursements journal to record these transactions.
  2. Prepare a schedule of accounts payable. There was no accounts payable balance on May 1.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

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

93

Dec. 1

Sold merchandise for $6,700 on credit to the Banks Co., terms 2/10, n/30, invoice

no. 1455. Cost of the merchandise sold is $3,600.

Dec. 1

Sold merchandise for $3,400 on credit to the Warsaw Co., terms 2/10, n/30.

Invoice no. 1456. Cost of the merchandise sold is $1,800.

Dec. 2

Sold merchandise for $590 for cash to the Draper Co. Invoice no. 1457. Cost of

the merchandise sold is $300.

Dec. 3

Borrowed $10,000 from Franklin Savings on a long-term note payable.

Dec. 3

Sold merchandise for $7,200 on credit to the Wentner Co., terms 2/10, n/30.

Dec. 3

Sold merchandise for $7,200 on credit to the Wentner Co., terms 2/10, n/30.

Invoice no. 1458. Cost of the merchandise sold is $4,000.

Dec. 5

Received the amount due from the Banks Co. from the sale on December 1.

Dec. 6

Sold merchandise on credit for $950 to the Global Co., terms 2/10, n/30. Invoice

No. 1459.

Dec. 6

Received the amount due from the Warsaw Co. from the sale on December 1.

  1. Use the sales journal and the cash receipts journal to record these transactions.
  2. Prepare a schedule of accounts receivable. There was no accounts receivable balance at December 1.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. The following information is available for Soda Station, Inc. (all amounts are in millions):

U.S.

Canada

Mexico

Segment sales

$6,300

$5,200

$3,800

Segment operating income

2,120

2,240

1,200

Segment average assets

3,800

4,200

2,800

  1. Determine the segment return on assets for each geographic segment.
  2. Comment on the results. How do the segments compare with respect to profitability?
  3. What measures could be taken to improve segment return?

Segment

Segment return on assets = Segment operating income/Segment

average assets

U.S.

$2,120/$3,800 = 55.8%

Canada

$2,240/$4,200 = 53.3%

Mexico

$1,200/$2,800= 42.9%

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Analytical Thinking

AACSB: BB Critical Thinking; FN Risk Analysis AICPA: Apply

  1. The following segment information is available for the three regions of the country in which Fresh Snacks, Inc. does business (all amounts are in millions):

Midwest

West

South

Segment operating income

120

380

75

Segment average assets

310

782

103

  1. Determine the segment return on assets for each geographic segment.
  2. Comment on the results. How do the segments compare with respect to profitability?

Segment

Segment return on assets = Segment operating

income/Segment average assets

Midwest

$120/$310= 38.7%

West

$380/$782= 48.6%

South

$75/$103 = 72.8%

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Analytical Thinking

AACSB: BB Critical Thinking; FN Risk Analysis AICPA: Apply

  1. Plimpton Sales uses special journals to record business transactions. Plimpton sells office equipment. The company completed the following transactions a through j. Identify the journal in which each transaction should be recorded.

a.

Paid an installment on a bank loan.

b.

Purchased inventory on credit.

c.

Paid cash to a creditor.

d.

Sold equipment to a customer on credit.

e.

Sold equipment to a customer for cash.

f.

Paid employees' salaries in cash.

g.

Received payment from a customer on credit.

h.

Purchased office supplies on account.

i.

Returned inventory to creditor before payment.

j.

Sold equipment on account.

a.

Cash disbursements

b.

Purchases

c.

Cash disbursements

d.

Sales

e.

Cash receipts

f.

Cash disbursements

g.

Cash receipts

h.

Purchases

i.

General

j.

Sales

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Decision Making AICPA: Understand

  1. Jamison Company uses special journals to record transactions. All of the companies listed below supply inventory to Jamison except McGarry Co. that supplies equipment. Use the purchases journal given below to answer the following questions:
  2. Foot and crossfoot the journal for accuracy.
  3. An error was made in the journal. Identify the error and indicate how to correct it.
  4. When Jamison compares the general ledger Accounts Payable account to the Accounts Payable ledger, it notices that the general ledger control account is $10,000 more than the schedule of Accounts Payable. What is the most likely cause and how should it be corrected?

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Analytical Thinking

AACSB: BB Critical Thinking; FN Decision Making AICPA: Apply

  1. Morris Company uses special journals to record transactions. Below are the sales journal and cash receipts journal for Morris. Prepare the following:
  2. Open an accounts receivable subsidiary ledger having a T-account for each customer. Post the invoices to the subsidiary ledger.
  3. Open an Accounts Receivable controlling T-Account. Post the end-of the month totals that affect the Accounts Receivable account only.
  4. Prepare a schedule of accounts receivable and prove that its total equals the Accounts Receivable controlling account balance.

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. Fagin Company uses special journals to record transactions. Below are the sales journal and cash receipts journal for Fagin in the first part of August.

Required:

  1. Open an accounts receivable subsidiary ledger having a T-account for each customer. Post the invoices to the subsidiary ledger.
  2. Open an Accounts Receivable controlling T-Account. Post the end-of the month totals that affect the Accounts Receivable account only.
  3. Prepare a schedule of accounts receivable and prove that its total equals the Accounts Receivable controlling account balance.

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. Valley Company shows the following customer accounts in its subsidiary ledger and the Accounts Receivable account in the general ledger for the month of July. Prepare a schedule of accounts receivable as proof that the subsidiary ledger balances equals the Accounts Receivable controlling account balance.

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. Health Co. Company uses special journals to record transactions. Health Co. uses the perpetual inventory system. Journalize the following transactions in the appropriate special journal. All credit sales have 2/10, n/30 terms.

103

Nov. 3

The company purchased $5,500 of merchandise on credit from Hatch, terms 2/10, n/30.

5

The company sold merchandise costing $5,250 to Level Company for

5

The company sold merchandise costing $5,250 to Level Company for

$8,900, invoice no. 278.

7

The owner, L. Garvey, contributed $15,000 cash to the company.

8

The company purchased $7,200 of merchandise on credit from Gentry

Company, terms 1/15, n/30.

10

The company sold merchandise costing $4,630 to Nance Company for

$8,250, invoice no. 279.

14

The company received payment from Level Company for the November 5

sale within the discount period.

15

Health Co. paid salaries of $5,560 for the first half of the month, check no.

214.

16

Health Co. returned $1,200 of the merchandise purchased on November 8

to Gentry Company.

20

Health Co. paid Gentry for the purchase on November 8 within the

discount period, check no. 215.

22

Health Co. purchased office equipment from Vale Co. costing $12,000 on

credit, terms n/30.

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Analytical Thinking

AACSB: BB Industry; FN Measurement AICPA: Apply

  1. The following information is available for Napa, Inc. (all amounts are in millions):

U.S.

Canada.

Europe

Segment sales

$7,745

$8,940

$4,780

Segment operating income

2,320

2,455

595

Segment average assets

5,590

8,750

1,480

  1. Determine the segment return on assets for each geographic segment.
  2. Comment on the results. How do the segments compare with respect to profitability?

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Analytical Thinking

AACSB: BB Critical Thinking; FN Risk Analysis AICPA: Apply

SHORT ANSWER QUESTIONS

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

  1. 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.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Technology

AACSB: BB Leveraging Technology; FN Leveraging Technology AICPA: Remember

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

  1. 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.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

  1. are the part of the accounting information system that interprets, transforms, and summarizes information for use in analysis and reporting.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

  1. are the part of the accounting information system that provide the means to take information out of the system and make it available to users.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

  1. A ________ journal is used to record and post transactions of similar type.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

A is an all-purpose journal that can record any type of transaction.

Learning Objective: 07-C2 Explain the goals and uses of special journals. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

  1. Using ________ ledgers, that store transaction data of individual accounts with common characteristics, removes unnecessary details from the general ledger.

Learning Objective: 07-C3 Describe the use of controlling accounts and subsidiary ledgers. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Technology

AACSB: BB Leveraging Technology; FN Leveraging Technology AICPA: Remember

  1. processing of transactions enters and processes data as soon as source documents are available.

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Technology

AACSB: BB Leveraging Technology; FN Leveraging Technology AICPA: Remember

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems.. Bloom's: Technology

AACSB: BB Leveraging Technology; FN Leveraging Technology AICPA: Remember

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

Learning Objective: 07-C1 Identify the principles and components of accounting information systems. Bloom's: Technology

AACSB: BB Leveraging Technology; FN Leveraging Technology AICPA: Remember

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

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-A1 Compute segment return on assets and use it to evaluate segment performance. Bloom's: Communication

AACSB: BB Industry; FN Risk Analysis AICPA: Remember

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

________.

Learning Objective: 07-P1 Journalize and post transactions using special journals.; 07-P2 Prepare and prove the accuracy of subsidiary ledgers.

Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

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

Learning Objective: 07-P2 Prepare and prove the accuracy of subsidiary ledgers. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

  1. 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.

Learning Objective: 07-P1 Journalize and post transactions using special journals. Bloom's: Communication

AACSB: BB Industry; FN Decision Making AICPA: Remember

Document Information

Document Type:
DOCX
Chapter Number:
7
Created Date:
Aug 21, 2025
Chapter Name:
Chapter 7 Accounting Information Systems
Author:
John J. Wild

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