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Ch7 | Accounting Systems – Complete Test Bank

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Testbank

to accompany

Financial accounting

10^th edition

Hoggett et al.

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Chapter 7: Accounting systems

Multiple-choice questions

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

a. Bank deposit slip

b. Managerial report

c. Cheque butt

d. Supplier invoice

Correct answer: b

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

2. The three phases in the development of an accounting system are:

Systems analysis
Systems plan
Systems design
Systems implementation and review

a. I, II, and III

b. I, III and IV

c. I, II, and IV

d. II, III and IV

Correct answer: b

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. 1

b. 2

c. 3

d. 4

Correct answer: c

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 statements relating to an accounting system is incorrect?

a. Only large businesses require an electronic accounting system.

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

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

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

Correct answer: a

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

5. 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 analysis

b. Systems design

c. Systems implementation

d. Systems review

Correct answer: a

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

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

a. Comparability with other systems used within the industry.

b. Compatibility with the organisation’s other systems

c. Adaptability

d. Cost versus benefits

Correct answer: a

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

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

a. output.

b. details.

c. information.

d. input.

Correct answer: c

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

8. A system of internal control is described as:

a. including aspects of administrative controls and accounting controls.

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

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

d. all of these options.

Correct answer: d

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

9. 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. custodianship of assets.

b. process control.

c. division of responsibility.

d. collusion.

Correct answer: c

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

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

a. Administrative controls

b. Procedural controls

c. Accounting controls

d. Programming controls

Correct answer: a

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

11. The limitations of internal control systems include:

a. absolute assurance for safeguarding against customer theft.

b. employee indifference to correct procedures.

c. cost of implementation.

d. all of these options.

Correct answer: d

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. Employment of security staff

b. Employee identification cards

c. Manager Authorisation

d. Password protected access to buildings

Correct answer: c

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

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

a. they provide summarised data.

b. they are included in the subsidiary ledger.

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

d. they are included in the trial balance.

Correct answer: b

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

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

a. to separate the accounting tasks between employees.

b. to enable more timely and efficient processing.

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

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

Correct answer: b

Learning objective 7. 3 ~ record appropriate transactions in subsidiary ledgers, and reconcile each ledger with the appropriate control account in the general ledger.

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

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

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

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

Correct answer: d

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

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

a. Plant and equipment

b. Trade creditors

c. Mortgage

d. Accounts receivable

Correct answer: c

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

17. Which of the following are advantages of using a subsidiary ledger and control account system?

Removes a mass of detail from the general ledger
Allows division of responsibility
Provides effective internal control

a. I and II only.

b. II and III only.

c. I and III only.

d. I, II and III.

Correct answer: d

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

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

a. accounts payable subsidiary ledger.

b. accounts payable control account.

c. accounts receivable subsidiary ledger.

d. general ledger.

Correct answer: c

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

19. The accounts receivable subsidiary ledger shows the following balances on 31 January 2019. 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. $0

b. $14 487 Dr

c. $14 487 Cr

d. Cannot be calculated from the information given

Correct answer: b

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 statements is correct?

a. A subsidiary ledger requires double entry accounting.

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

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

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

Correct answer: c

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

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

a. They dramatically reduce the occurrence of bad debts.

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

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

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

Correct answer: a

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

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

a. accounts receivable subsidiary ledger.

b. accounts payable control account.

c. accounts payable subsidiary ledger.

d. sales ledger.

Correct answer: a

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

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

a. key account.

b. summary account.

c. control account.

d. master account.

Correct answer: c

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

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

a. control account.

b. subsidiary ledger.

c. special journal for inventory.

d. manual accounting system.

Correct answer: b

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

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

a. They can be used with a cash accounting system.

b. They remove the need for double entry recording.

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

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

Correct answer: d

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

a. Preparation of a trial balance is easier.

b. Time required to journalise transactions is reduced.

c. Posting to the ledger is more efficient.

d. Similar transactions are grouped.

Correct answer: a

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

a. Sales and purchases

b. Cash receipts and sales

c. Cash receipts and cash payments

d. Cash receipts and purchases

Correct answer: b

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

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

b. cash purchases are recorded in the purchases journal.

c. cash purchases are recorded in the general journal.

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

Correct answer: d

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

a. DR Sales, CR Accounts receivable

b. DR Sales, CR GST payable, CR Cash

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

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

Correct answer: c

30. 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. Purchases journal

b. Sales journal

c. Cash receipts journal

d. Cash payments journal

Correct answer: a

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

a. General

b. Cash payments

c. Cash receipts

d. Sales

Correct answer: c

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

a. Purchase date

b. Supplier’s name

c. GST receivable

d. Cash/Bank

Correct answer: d

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

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

b. Goods sold for cash.

c. Second hand furniture sold for cash.

d. Borrowings received from the bank.

Correct answer: a

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.

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

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

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

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

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

Correct answer: d

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

a. Payment of telephone account

b. Purchase of goods on credit

c. Rent accrued at the end of the accounting period

d. Personal expenses paid from owner’s private cheque book

Correct answer: a

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

a. Narrations are required for each entry

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

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

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

Correct answer: c

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

a. Receipts to customers

b. Credit notes issued by suppliers

c. Signed contracts

d. Cheque butts

Correct answer: d

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

a. Cash receipts and cash payments

b. Cash receipts and sales

c. Cash payments and purchases

d. Sales and purchases

Correct answer: c

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

a. Cash receipts

b. Cash payments

c. Sales

d. Purchases

Correct answer: b

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. CRJ5

b. 5CR

c. R5

d. C5R

Correct answer: a

41. 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 (creditor) is owed $1500

b. Cathy (debtor) owes $1500

c. Cathy (creditor) is owed $2500

d. Cathy (debtor) owes $2500

Correct answer: a

42. 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 receivable $700; CR Accounts payable $700

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

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

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

Correct answer: c

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

43. Kingston Supplies bought $20 000 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 $8 000

Accounts payable, Princetown Pty Ltd $8 000

b. Accounts receivable, Princetown Pty Ltd 12 000

Accounts payable, Princetown Pty Ltd 12 000

c. Accounts payable, Princetown Pty Ltd 12 000

Accounts receivable, Princetown Pty Ltd 12 000

d. Accounts payable, Princetown Pty Ltd 8 000

Accounts receivable, Princetown Pty Ltd 8 000

Correct answer: d

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. Excel

b. Reckon

c. Xero

d. MYOB

Correct answer: a

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. Bank feeds.

b. Online invoicing.

c. Payroll.

d. All of these are automated functions.

Correct answer: d

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. Reports.

b. Sales.

c. Payroll.

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

Correct answer: d

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. tax documents.

b. reporting documents.

c. source documents.

d. handwritten documents only.

Correct answer: c

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. They can be used to analyse business data.

b. They can be used to develop business budgets.

c. They assist is determining ‘what if’ scenarios.

d. They are not used by accountants.

Correct answer: d

Learning objective 7.6 ~ understand the basic features of accounting software

49. Accounting software systems based on Cloud technology:

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

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

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

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

Correct answer: d

Learning objective 7.6 ~ understand the basic features of accounting software

50. Computerised accounting systems are collectively referred to as:

a. ledger systems.

b. accounting information systems.

c. software packages.

d. cloud systems.

Correct answer: b

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. Sales modules.

b. Purchases module.

c. Payroll module.

d. General ledger module.

Correct answer: d

Learning objective 7.6 ~ understand the basic features of accounting software

52. Which of the following are considered disadvantages of a computerised accounting system?

Inexperienced staff.
Slower processing.
Undetected viruses.
Increase in processing errors.
Programs that are not suited to the business’s needs.

a. I, II, III and IV.

b. II, III, IV, and V.

c. I, III, and V.

d. III, IV, and V.

Correct answer: c

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. hackers.

b. employees.

c. viruses.

d. fraudsters.

Correct answer: a

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. Posting to general ledger.

b. Production of sales invoices.

c. Preparation of financial statements.

d. All of these options.

Correct answer: d

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. Automatic

b. Administrative

c. Control

d. Physical

Correct answer: c

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. Processing of thousands of transactions at high speed.

b. Production of relevant reports in a timely manner.

c. Fast response time for customer queries.

d. Automatic posting of transactions to the general ledger.

Correct answer: b

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. advantage of computerised accounting systems.

b. disadvantage of computerised accounting systems.

c. advantage of manual accounting systems.

d. disadvantage of manual accounting systems.

Correct answer: a

Learning objective 7.6 ~ understand the basic features of accounting software

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

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

b. undetected viruses from low security.

c. unauthorised access by hackers.

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

Correct answer: d

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. Computer viruses

b. Computer fraud

c. Power failures

d. Inability to network the systems

Correct answer: d

Learning objective 7.6 ~ understand the basic features of accounting software

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

a. Reduced processing costs

b. More timely reports

c. Greater possibility of a catastrophic systems failure

d. Faster response time to wide range of queries

Correct answer: c

Learning objective 7.6 ~ understand the basic features of accounting software

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

Step in the Accounting Manual System Computerised

Cycle

a. Journalise transactions Manual Manual data entry

b. Post to ledger accounts Manual Manual

c. Journalise adjusting entries Manual Fully automatic

d. Preparation of worksheet Manual Manual

Correct answer: a

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.

Correct answer: c

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

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

a. The initial recording of transactions

b. Posting to the general ledger

c. Preparing a trial balance

d. Journalising reversing entries

Correct answer: a

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

Document Information

Document Type:

DOCX

Chapter Number:

Created Date:

Aug 21, 2025

Chapter Name:

Chapter 7 Accounting systems

Author:

John Hoggett

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