Accounting Systems | Test Bank – 11th Edition

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Testbank

to accompany

Accounting

11^th edition

by

Hoggett et al.

© John Wiley & Sons Australia, Ltd 2020

Chapter 7: Accounting systems

Multiple-choice questions

1. Data that have been processed in some prescribed manner to be more useful for decision making is called:

a. information

b. details.

c. input.

d. output

General Feedback:

Learning objective 7.1: understand how an accounting system operates and describe the three phases involved in the development of accounting systems.

2. Which of these does not normally provide an input into an accounting system?

a. Bank deposit slip

b. Supplier invoice

c. Sales invoice

d. Managerial report

General Feedback:

Learning objective 7.1: understand how an accounting system operates and describe the three phases involved in the development of accounting systems.

3. How many of the following are important considerations when developing a new accounting system or expanding an existing system?
· Flexibility/adaptability with a growing business
· Only fully understandable by senior managers
· Compatibility with the business operations
· Adequacy of built-in controls for business protection

a. 4

b. 3

c. 2

d. 1

General Feedback:

Learning objective 7.1: understand how an accounting system operates and describe the three phases involved in the development of accounting systems.

4. Which of the following is not an important consideration in the development of an accounting system?

a. Cost versus benefits

b. Compatibility with the organisation's other systems

c. Adaptability

d. Comparability with other systems used within the industry.

General Feedback:

Learning objective 7.1: understand how an accounting system operates and describe the three phases involved in the development of accounting systems.

5. Which of the following statements relating to an accounting system is incorrect?

a. An accounting system transforms economic transactions into information that is useful for decision making.

b. An accounting system makes the processing of repetitive transactions more efficient.

c. Only large businesses require an electronic accounting system

d. An accounting system is used for the efficient and reliable processing of an entity's financial data.

General Feedback:

Learning objective 7.1: understand how an accounting system operates and describe the three phases involved in the development of accounting systems.

6. The three phases in the development of an accounting system are:
I. Systems analysis
II. Systems plan
III. Systems design
IV. Systems implementation and review

a. II, III and IV

b. I, II, and III

c. I, II, and IV

d. I, III and IV

General Feedback:

Learning objective 7.1: understand how an accounting system operates and describe the three phases involved in the development of accounting systems.

7. In the development of an accounting system which stage gathers facts that provide a thorough understanding of a business's information requirements and the sources of information?

a. Systems review

b. Systems design

c. Systems implementation

d. Systems analysis

General Feedback:

Learning objective 7.1: understand how an accounting system operates and describe the three phases involved in the development of accounting systems.

8. The limitations of internal control systems include:

a. all of these options.

b. employee indifference to correct procedures.

c. cost of implementation.

d. absolute assurance for safeguarding against customer theft.

General Feedback:

Learning objective 7.2: identify the principles and the limitations of internal control systems.

9. A system of internal control is described as:

a. all measures used by a business to promote the reliability of accounting data.

b. all of these options

c. all procedures adopted by an entity to control its activities and protect its assets..

d. including aspects of administrative controls and accounting controls.

General Feedback:

Learning objective 7.2: identify the principles and the limitations of internal control systems.

10. The assignment of tasks so that the work of one employee acts as a check on the work of another employee is known as:

a. collusion.

b. process control.

c. custodianship of assets.

d. division of responsibility.

General Feedback:

Learning objective 7.2: identify the principles and the limitations of internal control systems.

11. Internal controls established to provide general operational efficiency and adherence to prescribed policies are:

a. Procedural controls

b. Programming controls

c. Administrative controls

d. Accounting controls

General Feedback:

Learning objective 7.2: identify the principles and the limitations of internal control systems.

12. Which of the following is not a physical means of internal control?

a. Password protected access to buildings

b. Employee identification cards

c. Employment of security staff

d. Manager Authorisation

General Feedback:

Learning objective 7.2: identify the principles and the limitations of internal control systems.

13. Individual stock records for a retail company are maintained in a:

a. manual accounting system.

b. special journal for inventory.

c. control account.

d. subsidiary ledger.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

14. Which of the following statements about control accounts is incorrect?

a. they are included in the subsidiary ledger.

b. they are included in the trial balance.

c. they provide summarised data.

d. they apply the normal rules of debit and credit.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

15. Which of the following would not normally use a subsidiary ledger and control account system?

a. Mortgage

b. Trade creditors

c. Accounts receivable

d. Plant and equipment

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

16. Hodges Ltd uses a subsidiary ledger and control account system for its accounts receivable. At the end of the accounting period a list of customers' accounts and balances owing is prepared from the subsidiary ledger. The purpose of this customer list is to:

a. prove that the subsidiary ledger agrees with the control account.

b. determine the amount that should be posted to the accounts receivable control account.

c. establish whether the total debits and total credits in the subsidiary ledger are equal.

d. provide information necessary for the completion of the trial balance.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

17. Subsidiary ledgers in a manual accounting system have three main advantages. Which of the following is not one of those advantages?

a. They improve internal control through the reconciliation of the control account with the subsidiary ledger.

b. They allow a division of labour in maintaining the general and subsidiary ledgers.

c. They dramatically reduce the occurrence of bad debts.

d. They remove a mass of detail from the general ledger.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

18. The accounts receivable subsidiary ledger shows the following balances on 31 January 2022. The balance in the accounts receivable control account at this date is:
(Assume recording and balancing of accounts payable records are up to date.)
· Barry Ltd $2 875
· Roberts Ltd $8 113
· Symes Ltd $3 499

a. $14 487 Dr

b. Cannot be calculated from the information given

c. $14 487 Cr

d. $0

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

19. Details of amounts owed by individual debtors are found in the:

a. general ledger.

b. accounts payable control account.

c. accounts payable subsidiary ledger.

d. accounts receivable subsidiary ledger.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

20. Which of the following are advantages of using a subsidiary ledger and control account system?
I. Removes a mass of detail from the general ledger
II. Allows division of responsibility
III. Provides effective internal control

a. I, II and III.

b. II and III only.

c. I and II only.

d. I and III only.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

21. All the details of transactions between the entity and individual customers are found in the:

a. accounts payable subsidiary ledger.

b. accounts payable control account.

c. sales ledger.

d. accounts receivable subsidiary ledger.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

22. Which of the following statements is correct?

a. Every business must have special journals to record transactions for returns of goods

b. A business with three debit customers would need to set up an accounts payable subsidiary ledger.

c. A subsidiary ledger requires double entry accounting.

d. A manual accounting system that has both a control account and a subsidiary ledger for creditors requires transactions for creditors to be recorded twice.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

23. The main reason for using control accounts and subsidiary ledgers is:

a. to reduce the number of mistakes in the recording process.

b. to separate the accounting tasks between employees.

c. to allow the manual system to be more easily computerised.

d. to enable more timely and efficient processing.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

24. A general ledger account that summarises the detail maintained in a subsidiary ledger is called a:

a. control account.

b. summary account.

c. master account.

d. key account.

General Feedback:

Learning objective 7.3: record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

25. Cathy is both a debtor and a creditor of Palm Ltd. At the end of the period Cathy owes Palm Ltd $500 while Palm Ltd owes Cathy $2000. After offsetting the amounts, Palm Ltd's books show a balance of how much as still owing to or from Cathy?

a. Cathy (debtor) owes $1500

b. Cathy (debtor) owes $2500

c. Cathy (creditor) is owed $2500

d. Cathy (creditor) is owed $1500

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used

26. Which of the following is the main advantage of setting up special journals?

a. They reduce the time required to journalise each entry and post to the general ledger..

b. They can be used with a cash accounting system

c. They make the preparation of a trial balance easier.

d. They remove the need for double entry recording.

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.

27. Which of these is not an advantage of using special journals compared to recording all transactions in a general journal?

a. Time required to journalise transactions is reduced.

b. Similar transactions are grouped.

c. Posting to the ledger is more efficient.

d. Preparation of a trial balance is easier.

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.

28. For a GST-registered business, columns for GST Payable will be found in which two special journals?

a. Cash receipts and sales

b. Cash receipts and purchases

c. Cash receipts and cash payments

d. Sales and purchases

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.

29. Which of the following statements is correct? In a manual accounting system:

a. cash purchases are recorded in the cash payments journal.

b. cash purchases are recorded in the cash receipts journal.

c. cash purchases are recorded in the purchases journal.

d. cash purchases are recorded in the general journal.

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.

30. What is the general ledger posting from the credit sales journal?

a. DR Accounts receivable, CR Sales, CR GST payable

b. DR Sales, CR GST payable, CR Cash

c. DR Cash, DR GST payable, CR Accounts receivable

d. DR Sales, CR Accounts receivable

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.

31. Which of the following transactions would not be recorded in the cash receipts journal?

a. Borrowings received from the bank.

b. Goods sold for cash.

c. Second hand furniture sold for cash.

d. Cash refund to a customer for goods returned by them.

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.
Feedback: A cash refund to a customer for goods returned by them would not be recorded in the cash receipts journal. It would be recorded in the cash payments journal

32. A column for discount allowed could be found in which special journal?

a. Cash receipts

b. General

c. Cash payments

d. Sales

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.

33. Which of the following transactions could not result in a credit balance in a debtor's account?

a. Goods are sold on credit with payment due in the next accounting period.

b. Customer returns a faulty product after they have paid the account in full.

c. Receive a deposit from a debtor for goods ordered.

d. Customer pays their account after the debt had been written off as a bad debt.

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used

34. Which of the following transactions would be recorded in the cash payments journal?

a. Purchase of goods on credit

b. Rent accrued at the end of the accounting period

c. Payment of telephone account

d. Personal expenses paid from owner's private bank account.

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used

35. Which of the following is not a column heading in a purchases journal?

a. Cash/Bank

b. GST receivable

c. Purchase date

d. Supplier's name

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.

36. A credit of $550 000, including 10% GST, was posted to the accounts payable control account on the last day of the month. This posting would most likely have come from which special journal?

a. Cash payments journal

b. Purchases journal

c. Sales journal

d. Cash receipts journal

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used.

37. Source documents used for the preparation of the cash payments journal include:

a. Electronic fund transfers to creditors

b. Receipts to customers

c. Signed contracts

d. Credit notes issued by suppliers

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used

38. Columns for GST receivable could be found in which two special journals?

a. Cash payments and purchases

b. Sales and purchases

c. Cash receipts and sales

d. Cash receipts and cash payments

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used

39. A Discount received column could be found in which special journal?

a. Cash payments

b. Purchases

c. Sales

d. Cash receipts

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used

40. The posting reference column in the general ledger is used to show the source journal for the transaction. Which of the following symbols is commonly used as a posting reference to refer to page 5 of the cash receipts journal?

a. C5R

b. 5CR

c. R5

d. CRJ5

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used

41. Which of the following is an advantage of using a sales journal compared with recording all sales transactions in a general journal?

a. Only the totals of each column are posted to the general ledger

b. Narrations are required for each entry

c. The date of each transaction is not required to be recorded

d. Each sales transaction is recorded on multiple lines to provide full details

General Feedback:

Learning objective 7.4: record transactions for sales, purchases, cash receipts and cash payments in special journals and understand the purpose and use of the general journal when special journals are used

42. Kingston Supplies bought $20000 worth of goods from Princetown Pty Ltd on credit. Before payment was made Princetown, in turn, purchased $8000 worth of supplies on credit from Kingston Supplies. The general journal entry to be recorded in the books of Kingston Supplies to offset the amount owing to it against the amount it owes is:

a. Accounts receivable, Princetown Pty Ltd 12 000
Accounts payable, Princetown Pty Ltd 12 000

b. Accounts payable, Princetown Pty Ltd 8 000
Accounts receivable, Princetown Pty Ltd 8 000

c. Accounts payable, Princetown Pty Ltd 12 000
Accounts receivable, Princetown Pty Ltd 12 000

d. Accounts receivable, Princetown Pty Ltd $8 000
Accounts payable, Princetown Pty Ltd $8 000

General Feedback:

Learning objective 7.5: handle circumstances where abnormal balances appear in subsidiary ledgers, and where account set-offs are required.

43. Barry is both a debtor and a creditor of Allen Ltd. At the end of the period Barry owes Allen Ltd $1400 while Allen Ltd owes him $800. Allen Ltd should record which journal entry to offset the amounts against each other?

a. DR Accounts payable $800; CR Accounts receivable $800

b. DR Accounts payable $2200; CR Accounts receivable $2200

c. DR Accounts receivable $700; CR Accounts payable $700

d. DR Accounts receivable $2200; CR Accounts payable $2200

General Feedback:

Learning objective 7.5: handle circumstances where abnormal balances appear in subsidiary ledgers, and where account set-offs are required.

44. Which of the following is not a general ledger software package?

a. Reckon

b. Xero

c. MYOB

d. Excel

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

45. Which of the following is not an advantage of a computerised accounting system compared to a manual system?

a. Greater possibility of a catastrophic systems failure

b. Reduced processing costs

c. Faster response time to wide range of queries

d. More timely reports

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

46. Which of the following is an automated function provided by accounting software programs?

a. Online invoicing.

b. All of these are automated functions.

c. Payroll.

d. Bank feeds.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

47. Which of the following is not an example of a module that can be found in most accounting software packages?

a. All of these options are examples of modules within an accounting software package..

b. Sales.

c. Payroll.

d. Reports

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

48. Data input for each computerised accounting module is obtained from:

a. source documents..

b. tax documents

c. handwritten documents only.

d. reporting documents.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

49. Which of the following statements relating to electronic spreadsheets is incorrect?

a. They are not used by accountants

b. They assist is determining 'what if' scenarios.

c. They can be used to analyse business data.

d. They can be used to develop business budgets

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

50. Accounting software systems based on Cloud technology:

a. can be accessed anywhere, anytime by authorised staff through various mobile technologies.

b. cannot be accessed anywhere, anytime through a mobile device.

c. can be accessed by anyone from any mobile device.

d. can be accessed anytime by authorised staff from the one desktop device only.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

51. What advantage does the automatic production of documents and reports provide a business?

a. Automatic posting of transactions to the general ledger.

b. Processing of thousands of transactions at high speed.

c. Fast response time for customer queries.

d. Production of relevant reports in a timely manner.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

52. Computerised accounting systems are collectively referred to as:

a. software packages

b. ledger systems.

c. cloud systems.

d. accounting information systems.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

53. Which module is central to all computerised accounting systems?

a. General ledger module.

b. Sales modules.

c. Purchases module.

d. Payroll module.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

54. Which of the following are considered disadvantages of a computerised accounting system?
I. Inexperienced staff.
II. Slower processing.
III. Undetected viruses.
IV. Increase in processing errors.
V. Programs that are not suited to the business's needs.

a. II, III, IV, and V.

b. III, IV, and V.

c. I, II, III and IV.

d. I, III, and V.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

55. Which automatic procedure is an advantage of computerised accounting systems?

a. Posting to general ledger.

b. All of these options.

c. Preparation of financial statements.

d. Production of sales invoices.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

56. Unauthorised access to a business's computer files and/or confidential information would be performed by people known as:

a. employees.

b. viruses.

c. fraudsters.

d. hackers.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

57. procedures must exist to ensure the accuracy of data input into a computerised accounting system.

a. Physical

b. Control

c. Automatic

d. Administrative

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

58. Reduction in processing costs is an advantage/disadvantage of:

a. disadvantage of computerised accounting systems.

b. advantage of manual accounting systems.

c. disadvantage of manual accounting systems.

d. advantage of computerised accounting systems

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

59. Which of the following is not a problem of computerised accounting systems?

a. Inability to network the systems

b. Computer viruses

c. Power failures

d. Computer fraud

General Feedback:

Learning objective 7.6: understand the basic features of accounting software

60. The main reason a business may not fully realise the advantages of a computerised accounting system is due to:

a. failed systems due to problems with the hardware, software or personnel.

b. unauthorised access by hackers.

c. .lack of back-ups in instances of power failures.

d. undetected viruses from low security.

General Feedback:

Learning objective 7.6: understand the basic features of accounting software.

61. Which step is not performed automatically in a computerised accounting system?

a. Posting to the general ledger

b. Preparing a trial balance

c. Journalising reversing entries

d. The initial recording of transactions

General Feedback:

Learning objective 7.7: outline how the accounting cycle works in manual and computerised systems.

62. In comparing computerised and manual accounting systems, which of the following statements is correct?

a. A computerised system does not require any reversing entries.

b. Errors are easier to find in a computerised accounting system.

c. In computerised systems, the use of journals is less important than in a manual system.

d. A worksheet for adjustments is still often prepared when a computerised system is used.

General Feedback:

Learning objective 7.7: outline how the accounting cycle works in manual and computerised systems.

63. In comparing the operation of a manual accounting system with a computerised system which of the following is correct?

a. Step in the Accounting Cycle: Post to ledger accounts - Manual System: Manual; Computerised: Manual

b. Step in the Accounting Cycle: Journalise adjusting entries - Manual System: Manual; Computerised: Fully automatic

c. Step in the Accounting Cycle: Preparation of worksheet - Manual System: Manual; Computerised: Manual

d. Step in the Accounting Cycle: Journalise transactions - Manual System: Manual; Computerised: Manual data entry

General Feedback:

Learning objective 7.7: outline how the accounting cycle works in manual and computerised systems.