Test Bank 1st | Info Systems Accounting

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Chapter 6

Accounting Information Systems

Test Bank

True/False Questions

1. An accounting information system is the overall accounting system maintained by a business entity including computerized software modules that handle the accounting process, accounting policies and procedures and the human organizations that handle accounting activities.

Page: p303

1. Transactions recorded in special journals are summarized and recorded in the general journal.

Page: p305

1. A subsidiary ledger is a listing of all journal entries related to a given general ledger account.

Page: p305

1. In the sales subsystem, the sales invoice is the source document used to record the journal entry for the sale in the sales journal.

Page: p310

1. In the sales subsystem, customers order goods or services using a sales order.

Page: p310

1. In the sales subsystem, a sales order is an internal document that a customer’s credit has been approved and that other appropriate approvals have been given.

Page: p310

1. In the sales subsystem, the receivables sub-ledger contains a list of all sales journals that have been recorded in the general ledger to the sales account.

Page: p310

1. In the sales subsystem, once goods are shipped a shipping document, also known as a bill of lading is prepared.

Page: p310

1. In the sales subsystem, the source document used to record the sales in the sales journal is the bill of lading.

Page: p310

1. In the cash receipts subsystem, the source document used to record the cash receipt journal is the bank deposit slip.

Page: p312

1. In the cash receipts subsystem, the cash receipts journal is posted to the receivables sub-ledger.

Page: p312

1. In the sales returns and allowances subsystem, when a customer’s request for a sales return or allowance is approved, a debit memo is issued.

Page: p313

1. A customer is offered a sales discount of 4/10, net 45. In this case, the customer pays within four days, a 10% discount.

Page: p314

1. A customer is offered a sales discount of 3/5, net 20. In this case, the customer is expected to pay within 20 days or be classified as delinquent. However, a three percent discount will be given if the customer pays within 5 days.

Page: p314

1. A customer is offered a sales discount of net 40. In this case, the customer is expected to pay within 40 days or be classified as delinquent. No discount is offered.

Page: p314

1. Both the sales returns and allowances account and the sales discount account are contra-accounts to sales revenue.

Page: p315

1. Net sales is calculated by deducting sales returns and allowances from gross sales.

Page: p316

1. In the statement mode of payment, customers are expected to pay for each order individually within the terms agreed upon.

Page: p316

1. A retail store sells $400 in merchandise to a customer who uses a Visa™ to pay. Visa™ charges a 2% fee for processing the transaction. To record the sales entry, the store would debit Trade Accounts Receivable -- Visa™ for $392 and credit Sales Revenue for $392.

Page: p316

1. In the purchases subsystem, the source document used to enter the purchase journal is the vendor invoice.

Page: p319

1. In the purchases subsystem, a company orders goods or services by sending a purchase requisition to the supplier.

Page: p319

1. In the purchase subsystem, if an internal department or function within a company wishes to purchase goods or services, a purchase requisition is prepared.

Page: p319

1. In the cash disbursements subsystem, the journal entry to record payment is prepared from the check or electronic funds transfer sent to the vendor.

Page: p320

1. In the cash disbursements subsystem, a remittance advice is a request for payment by the vendor for goods or services that have been shipped to the company.

Page: p320

1. In the purchase returns and allowances subsystem, a debit memo is issued when the supplier grants the request for a purchase return or allowance.

Page: p321

1. A journal entry to record a purchase return or allowance is recorded in the receivables subsidiary ledger.

Page: p322

1. A company purchases ¥50,000 in electronic components on terms 2/15, net 30. If the company pays within 10 days the appropriate journal entry to record the payment would be to debit Trade Accounts Payable for ¥49,000 and purchase discount for ¥1,000 and credit cash for ¥50,000.

Page: p322

1. In the fixed assets cycle, the fixed assets register contains a listing of all journal entries that have affected fixed assets.

Page: p326

1. The conversion subsystem accounts for three levels of inventory: finished goods, work-in-process and direct materials.

Page: p326

1. Audit trails are used in both manual and computerized accounting systems.

Page: p329

Multiple Choice Questions

1. The accounting information system is a part of which of the following business information systems?
   1. Customer Relationship Management
   2. Supply Chain Management
   3. Business Intelligence Systems
   4. Enteprise Resource Planning

Page: p303

1. Detailed information on the balances owed to specific suppliers would be maintained in which of the following?
   1. General ledger
   2. Special journal
   3. Daybook
   4. Subsidiary ledger

Page: p305

1. In the sales subsystem, the source document to record the journal entry for the sale in the sales journal would be which of the following?
   1. Bill of lading
   2. Sales invoice
   3. Sales order
   4. Customer purchase order

Page: p310

1. In the sales subsystem, detail information on what transactions account for a specific customer’s trade accounts receivable balance would be found in which of the following?
   1. Receivables sub-ledger
   2. General ledger
   3. Sales journal
   4. Sales order file

Page: p310

1. In the sales subsystem, an internal document which verifies that the appropriate approvals have been given on a customer order would be which of the following?
   1. Sales invoice
   2. Customer purchase order
   3. Sales order
   4. Bill of lading

Page: p310

1. In the cash receipts subsystem, the source document to record the journal entry for the receipt of cash would be which of the following?
   1. Receivables sub-ledger
   2. The payment received from the customer
   3. Bank deposit slip
   4. Cash receipts list

Page: p312

1. In the sales returns and allowances subsystem, when a customer is granted a sales return or allowance which of the following would be issued?
   1. Credit memo
   2. Debit memo
   3. Journal entry recorded in the special returns and allowances journal
   4. Sales return or allowance request

Page: p313

1. A customer is offered a sales discount of 4% if payment is made within 12 days and no discount thereafter. In any event, the customer will be in default if payment is not made within 45 days. These terms would be expressed by which of the following?
   1. Net 45, 4/12
   2. 4/12, net 45
   3. 4/12/45
   4. 4/12, 0/45

Page: p314

1. A company has gross sales of €23,000 for the reporting period. During the same period, €450 in sales discounts were taken by customers and the company granted €130 in sales returns and allowances. Cost of goods sold was €12,500. Purchase discounts totaling €200 were taken by the company. What amount of net sales did the company report for the period?
   1. €22,200
   2. €10,120
   3. €22,420
   4. €9,920

Page: p316

1. A company extends credit to a customer on terms 3/10. Net 30 for a merchandise purchase on 30 June 2011 totaling $45,000. The customer paid the balance owed on 11 July 2011. The journal entry to record the payment would be which of the following?
   1. Debit Cash $45,000; credit Trade Accounts Receivable $45,000
   2. Debit Cash $43,650 and Sales Discounts $1,350; credit Trade Accounts Receivable $45,000
   3. Debit Cash $43,650; credit Trade Accounts Receivable $43,650
   4. Debit Cash $45,000; credit Trade Account Receivable $43,650 and Sales Discounts $1,350

Page: p314

1. On 28 February 2010, a company sold equipment to a customer for £450,000 on terms 2/20, net 45. On 4 March 2010, the customer returned £25,000 of the equipment which was defective. One 17 March 2010, the customer paid the balance owed. The journal entry to record payment from the customer would be which of the following?
   1. Debit Cash £425,000; credit Trade Accounts Receivable £416,500 and Sales Discounts £8,500
   2. Debit Cash £441,000 and Sales Discounts £9,000; credit Trade Accounts Receivable £450,000
   3. Debit Cash £450,000; credit Trade Accounts Receivable £441,000 and Sales Discounts £9,000
   4. Debit Cash £416,500 and Sales Discounts £8,500; credit Trade Accounts Receivable £425,000

Page: p314

1. In the purchases subsystem, the source document to record the journal entry for a purchase is which of the following?
   1. Receiving report
   2. Vendor invoice
   3. Purchase order
   4. Purchase requisition

Page: p319

1. In the purchases subsystem, the document used to prepare a purchase order is which of the following?
   1. Receiving report
   2. Vendor invoice
   3. Purchase order
   4. Purchase requisition

Page: p319

1. In the purchases subsystem, the document that verifies that goods have been received from the supplier is which of the following?
   1. Receiving report
   2. Vendor invoice
   3. Purchase order
   4. Purchase requisition

Page: p319

1. In the cash disbursements subsystem, the journal entry to record the disbursement of the funds would be recorded from which of the following?
   1. Receiving report
   2. Vendor invoice
   3. Purchase order
   4. Cheque or electronic funds transfer

Page: p320

1. In the purchase returns and allowances subsystem, the journal entry to record the purchase return or allowance is recorded from which of the following?
   1. Credit memo
   2. Vendor invoice
   3. Debit memo
   4. Cheque or electronic funds transfer

Page: p321

1. In the purchase returns and allowances subsystem, when a supplier grants a purchase return or allowance, which of the following is prepared?
   1. Credit memo
   2. Purchase requisition
   3. Debit memo
   4. Vendor invoice

Page: p321

1. Prszha, Ltd. ordered 124 desk chairs for its new office facilities on 13 June 2010 which were received on 20 August 2010. The total amount of the order was €7812. However, the supplier offered a 2.5% discount if the amount were paid within 15 days. On 22 August 2010, Prszha returned 18 of the chairs because they were defective. On 24 August 2010 Prszha paid the balance due. The journal entry to record the payment would have included which of the following?
   1. Credit to purchase discount for €1134
   2. Credit to cash for €6511
   3. Debit to purchase discount for €167
   4. Debit to trade accounts payable for €7812

Page: p321

1. In the employee compensation cycle, which of the following would result in a journal entry being recorded in the payroll journal?
   1. The employee provides services
   2. The employee is paid
   3. The business hires the employee
   4. The personnel record including deductions is completed

Page: p325

1. A listing of fixed assets maintained in the fixed assets subsystem is referred to as which of the following?
   1. Asset sub-ledger
   2. Asset general ledger
   3. Asset inventory
   4. Asset register

Page: p326

1. In the inventories and conversion cycle, which of the following makes up overhead costs?
   1. Direct materials and labour
   2. Indirect materials, labor and indirect labour
   3. Indirect materials and indirect labour
   4. Direct materials, labour, indirect materials and indirect labour

Page: p327

1. A specific amount shown on a financial statement would be traced back to the source document by an audit trail in which of the following sequences?
   1. Trial balance, ledger account, journal, source document
   2. Source document, ledger account, trial balance, journal
   3. Ledger account, source document, trial balance, journal
   4. Journal, ledger account, trial balance, source document

Page: p329

Essay Questions

1. Explain the difference between the general ledger and subsidiary ledger. Provide an example.
2. What is a contra-account? Provide an example.
3. What are the two common modes of payment in business?
4. What are the three levels of inventory maintained in the conversion cycle? Briefly describe each.
5. Explain what an audit trail is and its purpose.