Unit 5

Question 1

1. The general ledger and reporting system consists of the __________ involved in __________ the general ledger and __________ reports.

a) business transactions; updating; processing
b) data processing; business transactions for; printing
c) information processing; updating; creating
d) business transactions; data processing; preparing

Answer 1

c) information processing; updating; creating

Question 2

2. Which item below is not considered a major input to the general ledger and reporting system?
   a) summary entries from the major subsystems
   b) reports from managers
   c) adjusting entries
   d) financing and investing activities

Answer 2

b) reports from managers

Question 3

3. Who provides the adjusting entries for a well-designed general ledger and reporting system?
   a) various user departments
   b) the treasurer’s area
   c) the other major AIS subsystems
   d) the controller’s area

Answer 3

d) the controller’s area

Question 4

4. The general ledger and reporting system is designed to provide information for which of the following user groups?
   a) internal users
   b) external users
   c) inquiry processing by internal or external users
   d) all of the above

Answer 4

d) all of the above

Question 5

5. The general ledger system of an organization should be designed to serve the information requirements of both financial and nonfinancial users. This means that the system should
   a) support producing regular periodic reports.
   b) support the real-time inquiry needs of all users.
   c) support producing regular periodic reports and respond to real-time inquiry needs.
   d) support access by investors and creditors of the organization to general ledger balances.

Answer 5

c) support producing regular periodic reports and respond to real-time inquiry needs.

Question 6

6. The first activity in the general ledger system is to update the general ledger. Updates come from the various accounting subsystems as well as from the treasurer. How is general ledger updating accomplished by the various accounting subsystems?
   a) Individual journal entries for each accounting subsystem transaction update the general ledger every 24 hours.
   b) Summary journal entries that represent the results of all transactions for a certain time period are used to update the general ledger.
   c) The controller or treasurer must approve accounting subsystem journal entries before any updating may occur.
   d) Nonroutine transactions are entered into the system by the treasurer’s office.

Answer 6

b) Summary journal entries that represent the results of all transactions for a certain time period are used to update the general ledger.

Question 7

7. When updating the general ledger, sales, purchases, and production are examples of __________ entries, and issuance or retirement of debt and the purchase or sale of investment securities are examples of __________ entries.
   a) adjusting; controller originated
   b) accounting subsystem; treasurer originated
   c) adjusting; special journal
   d) controller generated; special journal

Answer 7

b) accounting subsystem; treasurer originated

Question 8

8. Entries to update the general ledger are often documented by which of the following?
   a) general journal
   b) subsidiary journal
   c) subsidiary ledgers
   d) journal vouchers

Answer 8

d) journal vouchers

Question 9

9. In accounting terminology, the form that documents journal entry updates to the general ledger is called
   a) a trial balance.
   b) an adjusted trial balance.
   c) a journal voucher.
   d) an accounting update memo.

Answer 9

c) a journal voucher.

Question 10

10. Adjusting entries that reflect events that have already occurred but for which no cash flow has taken place and not previously entered into the accounts are called
    a) accruals.
    b) deferrals.
    c) revaluations.
    d) corrections.

Answer 10

a) accruals.

Question 11

11. The recording of interest earned on an account balance or wages payable is an example of which type of adjusting journal entry?
    a) accrual entry
    b) deferral entry
    c) revaluation entry
    d) correcting entry

Answer 11

a) accrual entry

Question 12

12. The posting of adjusting journal entries is the second activity found in the general ledger system. Adjusting entries fall into several categories. An adjusting entry made at the end of an accounting period that reflects the exchange of cash prior to performance of a related event is called a(n)
    a) accrual entry.
    b) deferral entry.
    c) revaluation entry.
    d) correcting entry.

Answer 12

b) deferral entry.

Question 13

13. Depreciation and bad debts expense are examples of which type of adjusting entries?
    a) deferrals
    b) accruals
    c) revaluations
    d) estimates

Answer 13

d) estimates

Question 14

14. Adjusting entries that are made to reflect differences between the actual and recorded value of an asset or a change in accounting principle are called
    a) reconciliations.
    b) revaluations.
    c) estimates.
    d) accruals.

Answer 14

b) revaluations.

Question 15

15. Adjusting entries that are made to counteract the effects of errors found in the general ledger are called
    a) accruals.
    b) corrections.
    c) deferrals.
    d) estimates.

Answer 15

b) corrections.

Question 16

16. Corrections are entries made to correct errors found in __________.
    a) all journals.
    b) special journals.
    c) the general ledger.
    d) the financial statements.

Answer 16

c) the general ledger.

Question 17

17. Immediately after the adjusting entries are completed, the next step in the general ledger and reporting system is to prepare
    a) an adjusted trial balance.
    b) a closing entry.
    c) a worksheet.
    d) the statement of cash flows.

Answer 17

a) an adjusted trial balance.

Question 18

18. There are four basic activities performed in the general ledger and reporting system. Several of these activities represent the basic steps in the accounting cycle. In what step is the adjusted trial balance prepared?
    a) update the general ledger
    b) post adjusting entries
    c) prepare financial statements
    d) produce managerial reports

Answer 18

b) post adjusting entries

Question 19

19. The preparation of financial statements is the third activity in the general ledger system. To properly complete the accounting cycle, financial statements are prepared in a certain sequence. Which statement is prepared last in the sequence?
    a) the adjusted trial balance
    b) the income statement
    c) the balance sheet
    d) the statement of cash flows

Answer 19

d) the statement of cash flows

Question 20

20. A listing of journal vouchers by numerical sequence, account number, or date is an example of
    a) a general ledger control report.
    b) a budget report.
    c) a batch to be processed.
    d) responsibility accounting.

Answer 20

a) a general ledger control report.

Question 21

21. The final activity in the general ledger and reporting system is the production of various managerial reports. The report that shows planned cash inflows and outflows for each project is the
    a) journal voucher list.
    b) statement of cash flows.
    c) operating budget.
    d) capital expenditures budget.

Answer 21

d) capital expenditures budget.

Question 22

22. Various budgets can be produced for planning and evaluating performance within an organization. The operating budget
    a) compares estimated cash flows from operations with planned expenditures.
    b) shows cash inflows and outflows for each project.
    c) depicts planned revenues and expenditures for each organizational unit.
    d) is used for the purchase and retirement of property, plant, and equipment.

Answer 22

c) depicts planned revenues and expenditures for each organizational unit.

Question 23

23. Budgets and performance reports should be developed on the basis of
    a) responsibility accounting.
    b) generally accepted accounting principles.
    c) financial accounting standards.
    d) managerial accounting standards.

Answer 23

a) responsibility accounting.

Question 24

24. Cost center reports compare actual versus budget regarding __________ costs.
    a) controllable
    b) noncontrollable
    c) fixed
    d) variable

Answer 24

a) controllable

Question 25

25. Sales departments are most likely to be evaluated as ______ centers a) cost b) profit c) investment d) revenue

Answer 25

d) revenue

Question 26

26. Departments that mostly provide services to other units and charge those units for services rendered should be viewed as __________ centers. a) cost b) profit c) investment d) revenue

Answer 26

b) profit

Question 27

27. Variances for variable costs will be misleading when the planned output differs from budgeted output. A solution to this problem would be a) calling all costs fixed. b) to use flexible budgeting. c) better prediction of output. d) to eliminate the budgeting process.

Answer 27

b) to use flexible budgeting.

Question 28

28. Most budgets compare a standard budget amount to actual amounts that reflect the true performance of the organization. The budget standard is often a fixed target; however, given that these amounts are static, the budget does not account for unforeseen changes in the operating environment. A solution to this type of problem is to use a(n) a) operating budget. b) capital expenditures budget. c) cash flow budget. d) flexible budget.

Answer 28

d) flexible budget.

Question 29

29. Concerning the reporting environment, which of the following statements is not true? a) Many companies can submit required financial and tax fillings electronically to the SEC and IRS. b) Management reports are usually developed in spreadsheets and disseminated either through e-mail or by posting on the company intranet. c) For many companies, the electronic dissemination of reports containing financial information has been an efficient process for some time. d) Many companies post their financial statements on their corporate web sites.

Answer 29

c) For many companies, the electronic dissemination of reports containing financial information has been an efficient process for some time.

Question 30

30. Concerning XBRL, which of the following statements is not true? a) XBRL is a variant of XML. b) XBRL is specifically designed for use in communicating the content of financial data. c) XBRL creates unique tags for each data item. d) XBRL's adoption means accountants and systems professionals must know how to write XBRL code to take advantage of its benefits.

Answer 30

d) XBRL's adoption means accountants and systems professionals must know how to write XBRL code to take advantage of its benefits.

Question 31

31. The benefits of XBRL include: a) XBRL enables organizations to publish financial information only once, using standard XBRL tags. b) XBRL tagged information is interpretable and doesn't need to be re-entered by users. c) Both are benefits of XBRL d) Neither are benefits of XBRL

Answer 31

c) Both are benefits of XBRL

Question 32

32. Communications technology and the Internet can be used to reduce the time and costs involved in disseminating financial statement information. Users of such financial information still struggle in that many recipients have different information delivery requirements and may have to manually reenter the information into their own decision analysis tools. The ideal solution to solve these problems and efficiently transmit financial information via the Internet is to use a) HTML code. b) XML. c) the pdf file format. d) XBRL.

Answer 32

d) XBRL.

Question 33

33. Which of the following would be an effective control for achieving the general control objectives in the general ledger and reporting system? a) using well-designed documents and records b) online data entry with the use of appropriate edit checks c) prenumbering documents and accounting for the sequence numbers d) All of the above are appropriate.

Answer 33

d) All of the above are appropriate.

Question 34

34. A type of edit check that would ensure that entries are made to existing general ledger accounts is called a(n) __________ check. a) validity b) existence c) closed loop verification d) field

Answer 34

a) validity

Question 35

35. Journal entries made by either the treasurer or controller should be subject to input edit and processing controls. A check that can be made to ensure that the amount field in a journal entry contains only numeric data is called a __________. a) validity check b) field or format check c) zero-balance check d) sign check

Answer 35

b) field or format check

Question 36

36. One way of ensuring that recurring adjusting journal entries that are needed each month are in fact made each month would be a) to make all the entries a month in advance. b) to rotate the responsibility among the accounting staff. c) to program the entries to be made automatically. d) to create a standard adjusting journal entry file.

Answer 36

d) to create a standard adjusting journal entry file.

Question 37

37. The edit check that verifies the ending balance of an account in fact fully reflects the beginning balance and all debit and credit entries made thereafter is referred to as a a) run-to-run total. b) completeness check. c) closed loop verification. d) zero balance check.

Answer 37

a) run-to-run total.

Question 38

38. Reconciliation and control reports can help detect whether any errors have been made during the process of updating the general ledger. One reconciliation that indicates whether the sum of debit balances is equal to the sum of credit balances in the general ledger is commonly known as a) a trial balance. b) a completeness test. c) a closed-loop verification. d) a general journal listing.

Answer 38

a) a trial balance.

Question 39

39. This report indicates whether the total debits equal the total credits posted to the general ledger. a) a trial balance. b) a completeness test. c) a closed-loop verification. d) a general journal listing.

Answer 39

d) a general journal listing.

Question 40

40. Which of the following tasks are accomplished by following the audit trail? a) trace a transaction from original source document to the general ledger to a report b) trace an item in a report back through the general ledger to the original source c) trace all changes in the general ledger from beginning to ending balances d) All of the above are correct.

Answer 40

d) All of the above are correct.

Question 41

41. Which one of the following measures four dimensions of performance? a) human resources accounting b) social responsibility accounting c) a balanced scorecard d) integrated databases

Answer 41

c) a balanced scorecard

Question 42

42. A report containing measures that relate to the financial, internal operation, customer, and innovation and learning perspectives of an organization is called a(n) a) ERP. b) AIS. c) balanced scorecard. d) data warehouse.

Answer 42

c) balanced scorecard.

Question 43

43. Which one of the following dimensions provides measures on how efficiently and effectively the organization is performing key business processes? a) financial b) internal operations c) innovations and learning d) customer perspectives

Answer 43

b) internal operations

Question 44

44. To support the strategic decision-making requirements of organizations, a separate database may be created and maintained. The name used for such a database depends on its size. What is the smaller version of such a database called? a) a data warehouse b) a data mart c) a data store d) a database management system

Answer 44

b) a data mart

Question 45

45. A financial data warehouse provides support for strategic decision making because it a) consolidates current financial data. b) contains both current and historical financial data. c) contains current financial and operational data. d) summarizes historical data.

Answer 45

b) contains both current and historical financial data.

Question 46

46. Which statement below about data warehouses and data marts is true? a) The typical size of a data warehouse is small. b) Data warehouses may replace the transaction processing databases of an organization. c) A data warehouse or data mart complements the other databases within the organization by providing support for strategic decision making. d) Data marts can be used for transaction processing.

Answer 46

c) A data warehouse or data mart complements the other databases within the organization by providing support for strategic decision making.

Question 47

47. The process of accessing the data contained in a data warehouse and using it for strategic decision making is often referred to as: a) artificial intelligence b) business intelligence c) data mart d) data warehousing

Answer 47

b) business intelligence

Question 48

48. Which of the following techniques is not used in data mining? a) statistical analysis b) artificial intelligence c) expert systems d) neural networks

Answer 48

c) expert systems

Question 49

49. Which of the following is not one of the basic principles that make bar charts easy to read? a) Include data values with each element. b) Use 3-D rather than 2-D bars to make reading easier. c) Use colors or shades instead of patterns to represent different variables. d) Use titles that summarize the basic message.

Answer 49

b) Use 3-D rather than 2-D bars to make reading easier.

Question 50

50. Extensible Business Reporting Language is based on a) HTML. b) TCP/IP. c) XML. d) XL.

Answer 50

c) XML.

Question 51

51. Adjusting entries to the general ledger are typically provided by the a) budget department. b) controller. c) treasurer. d) chief executive officer.

Answer 51

b) controller.

Question 52

52. Information about financing and investing activities for use in making general ledger entries is typically provided by the a) budget department. b) controller. c) treasurer. d) chief executive officer.

Answer 52

c) treasurer.

Question 53

53. Which one of the following four general ledger activities is not concerned with the preparation of traditional financial statements? a) Post adjusting entries b) Produce managerial reports c) Update general ledger d) Prepare financial statements

Answer 53

b) Produce managerial reports

Question 54

54. Adjusting entries that are made to recognize revenue that has been received but not yet earned are called a) corrections. b) estimates. c) deferrals. d) accruals. e) revaluations.

Answer 54

c) deferrals.

Question 55

55. Adjusting entries that are made to adjust for the effects of errors made in previous entries are called a) corrections. b) estimates. c) deferrals. d) accruals. e) revaluations.

Answer 55

a) corrections.

Question 56

56. Adjusting entries that are made to recognize depreciation over the period are called a) corrections. b) estimates. c) deferrals. d) accruals. e) revaluations.

Answer 56

b) estimates.

Question 57

57. Adjusting entries that reflect a change in accounting principle used to value inventories are called a) corrections. b) estimates. c) deferrals. d) accruals. e) revaluations.

Answer 57

e) revaluations.

Question 58

58. Adjusting entries that are made to recognize revenue that has been earned but not yet received are called a) corrections. b) estimates. c) deferrals. d) accruals. e) revaluations.

Answer 58

d) accruals.

Question 59

59. Cheryl Liao is an accountant at Folding Squid Technologies. While making an adjusting entry to the general ledger, she received the following error message, “The account number referenced in your journal entry does not exist. Do you want to create a new account?” This message was the result of a a) validity check. b) field check. c) zero-balance check. d) completeness test.

Answer 59

a) validity check.

Question 60

60. Cheryl Liao is an accountant at Folding Squid Technologies. While making an adjusting entry to the general ledger, she received the following error message, “Your journal entry must be a numeric value. Please reenter.” This message was the result of a a) validity check. b) field check. c) zero-balance check. d) completeness test.

Answer 60

b) field check.

Question 61

61. Cheryl Liao is an accountant at Folding Squid Technologies. While making an adjusting entry to the general ledger, she received the following error message when she tried to save her entry, “The amounts debited and credited are not equal. Please correct and try again.” This message was the result of a a) validity check. b) field check. c) zero-balance check. d) completeness test.

Answer 61

c) zero-balance check.

Question 62

62. Cheryl Liao is an accountant at Folding Squid Technologies. While making an adjusting entry to the general ledger, she received the following error message when she tried to save her entry, “The data you have entered does not include a source reference code. Please enter this data before saving.” This message was the result of a a) validity check. b) field check. c) zero-balance check. d) completeness test.

Answer 62

d) completeness test.

Question 63

63. Business intelligence refers to the a) use of industrial espionage to capture data about competitors. b) use of data contained in a data warehouse for strategic planning. c) publications provided by industry consultants and news letters. d) systematic application of online search engines like Google to identify industry-specific trends and benchmarks.

Answer 63

b) use of data contained in a data warehouse for strategic planning.

Question 64

64. Which of the following is the most common violation of the principles of good graph design? a) Showing data in reverse chronological order b) Starting the horizontal axis at a value other than zero c) Starting the vertical axis at a value other than zero d) Use of titles that do not accurately describe the data that is plotted on the graph.

Answer 64

c) Starting the vertical axis at a value other than zero

Question 65

65. When a manager performs tests of hypothesized relationships by querying a database, she is using a) data mining. b) object linking and embedding (OLE.) c) data marting. d) online analytical processing (OLAP.)

Answer 65

d) online analytical processing (OLAP.)

Question 66

66. When a manager uses statistical methods and artificial intelligence to search for patterns in a database, she is performing a) data mining. b) object linking and embedding (OLE.) c) data marting. d) online analytical processing (OLAP.)

Answer 66

a) data mining.

Question 67

67. Bobby Burns, CEO of Maudlin Motors, walked into the office of Tom Sanchez, chief information officer. “Tom,” he said. “We need some way of getting a better handle on our overall performance. The financial reports are all well and good, but we need to track customer satisfaction and other aspects of the business.” Tom should recommend that Maudlin Motors a) implement a data warehouse system. b) set up a data mining operation. c) use online analytical processing (OLAP.) d) implement balanced scorecard reporting.

Answer 67

d) implement balanced scorecard reporting.

Question 68

68. Bobby Burns, CEO of Maudlin Motors, walked into the office of Tom Sanchez, chief information officer. “Tom,” he said. “We need some way of improving our overall performance. I’m thinking that if all top managers could perform queries on data from the past few years in order to draw conclusions about our strategic direction for the future, we would be on our way.” Tom should recommend that Maudlin Motors a) implement a data mining operation. b) set up an object linking and embedding function. c) use online analytical processing (OLAP.) d) implement balanced scorecard reporting.

Answer 68

c) use online analytical processing (OLAP.)

Question 69

69. Bobby Burns, CEO of Maudlin Motors, walked into the office of Tom Sanchez, chief information officer. “Tom,” he said. “We have tons of data about customers, vendors, production, everything, but I don’t think we’re using it as well as we could. I’m thinking that we could analyze the data and try to find any patterns or relationships that would help us plan for the future.” Tom should recommend that Maudlin Motors a) implement a data mining operation. b) set up an object linking and embedding function. c) use online analytical processing (OLAP.) d) implement balanced scorecard reporting.

Answer 69

a) implement a data mining operation.