sign in sign up
<<
Home , General journal

Chapter 14 MULTIPLE CHOICE 1. The general and reporting system consists of the ______involved in ______the 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

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) d) financing and investing activities

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

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

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.

6. The first activity in the general ledger system is to update the general ledger. Updates come from the various 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.

7. When updating the general ledger, , 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

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

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

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

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

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 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.

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

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

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.

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

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.

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

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 c) the d) the statement of cash flows

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 report. c) a batch to be processed. d) responsibility accounting.

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.

22. Various 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 and expenditures for each organizational unit. d) is used for the purchase and retirement of property, plant, and equipment.

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

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

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

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

27. Variances for variable 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.

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) budget. d) flexible budget.

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.

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 and systems professionals must know how to write XBRL code to take advantage of its benefits.

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

32. Communications technology and the Internet can be used to reduce the time and costs involved in disseminating 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.

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.

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

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

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.

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.

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.

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.

40. Which of the following tasks are accomplished by following the 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.

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

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.

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

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

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.

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.

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

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

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.

SHORT ANSWER 50. What is a general ledger and reporting system?

51. What are the four basic activities involved in the general ledger and reporting system?

52. What is a journal voucher file? What is the purpose of this file?

53. What is responsibility accounting?

54. How is a balanced scorecard used to assess organizational performance?

55. How is an audit trail used in the general ledger and reporting system?

56. Explain the benefits of XBRL.

ESSAY

57. Discuss the value and role of budgets as managerial reports.

58. What is data mining? Give an example of how it is used.

59. What are the control objectives in the general ledger and reporting system?

60. Describe three threats in the general ledger and reporting system and identify corresponding controls for each threat.

61. Explain the preparation of financial statements as the third step in the general ledger and reporting system.

ANSWER KEY

1. C 2. B 3. D 4. D 5. C 6. B 7. B 8. D 9. C 10. A 11. A 12. B 13. D 14. B 15. B 16. C 17. A 18. B 19. D 20. A 21. D 22. C 23. A 24. A 25. D 26. B 27. B 28. D 29. C 30. D 31. C 32. D 33. D 34. A 35. B 36. D 37. A 38. A 39. D 40. D 41. C 42. C 43. B 44. B 45. B 46. C 47. B 48. C 49. B 50. A general ledger and reporting system consists of the information processing operations involved in updating the general ledger and preparing reports that summarize the results of activities for both external and internal users. The information contained in the general ledger is also part of the preparation of financial statements. 51. Update general ledger. Post adjusting entries. Prepare financial statements. Produce managerial reports 52. A journal voucher is a form on which journal entries to update the general ledger are documented. The individual entries are stored in the journal voucher file. This file is equivalent to the general journal in a manual AIS. The journal voucher file forms an important part of the audit trail as well. Various internal controls must be implemented in order to maintain adequate security and access control over the file, because it provides a way to alter and change the data contained in the general ledger. 53. Responsibility accounting involves the reporting of financial results on the basis of managerial responsibilities within an organization. Reports show actual amounts and variances to budget for the current month and year to date for items controllable at that level. 54. The balanced scorecard contains four perspectives of measurement of the organization. The perspectives are financial, internal operations, innovation and learning, and customer. Together these different perspectives provide a dimensional overview of organizational performance that is greater than financial measures alone. A scorecard that has been properly designed will measure key aspects of the organization's strategy as well as show important links across the perspectives or dimensions. 55. An audit trail shows the path of a transaction through the accounting system. It can provide information needed to trace any changes made to the general ledger by tracing either to or from an original source document to the general ledger. It helps in tracing all changes in general ledger accounts from beginning balances to ending balances as well as any adjustments made to the accounts. 56. XBRL (eXtensible Business Reporting Language) is a variation of XML, which is designed to communicate the content of data. XML improves upon HTML by being able to describe the content of the data presented. However, XML is limited when communicating financial information. For financial purposes, XBRL identifies each piece of data, along with how the data should be processed and how the data relate to other data items. XBRL may soon become the universal standard computer language for communicating financial data. XBRL enables organizations to publish financial information only once, using standard XBRL tags. XBRL tagged information is interpretable and doesn't need to be re-entered by users. 57. Budgets are managerial reports that can be extracted from the general ledger and reporting system. Budgets are used for planning and evaluating the organization's performance. There are several different types of budgets that an organization may use in this regard. The operating budget shows the planned revenues and expenditures for each organizational unit. Cash flow budgets compare the estimated cash inflows from operations with planned expenditures, and they are particularly useful to determine the borrowing needs of the organization. A budget shows the projected cash inflows and outflows for a given project. Budgetary reports should be tailored to the nature of the unit or department being evaluated, and they should show actual versus projected budget amounts. Unfortunately, many budget amounts are viewed as fixed targets, and they are therefore static and inflexible. Such an approach may either reward or penalize managers for factors that are beyond their control. A solution to this problem is to develop a flexible budget, in which variable budgeted amounts change in relation to some measure of organizational activity, such as labor hours, or a percentage of sales. A flexible budget may also break amounts into their respective fixed and variable components. Variable amounts can then be adjusted for fluctuations in sales or production. 58. Data mining is another way to access the information stored in a data warehouse. Data mining involves the use of sophisticated statistical analysis, including artificial intelligence techniques like neural networks, to discover new hypothetical relationships in the data. Credit card companies use data mining to identify patterns of use indicative of fraud. Similarly, data mining techniques can be used to identify previously unknown relationships in sales data that can then be used as the basis for future promotions. 59. All updates to the general ledger are properly authorized. All recorded general ledger transactions are valid. All valid, authorized general ledger transactions are recorded. All general ledger transactions are accurately recorded. General ledger data are safeguarded from loss or theft. General ledger system activities are performed efficiently and effectively. 60. Threat 1: Errors in updating the general ledger because of inaccurate/incomplete journal entries or posting of journal entries - Controls: (1) Input, edit, and processing controls over summary entries from subsystems. (a) Validity check over existence of general ledger accounts. (b) Field check over numeric data in amount field. (c) Zero-balance check ensures equality of (d) Completeness test - all pertinent data are entered (e) Redundant data check - closed loop verification to see if on account numbers and descriptions (f) Standard adjusting entry file for recurring entries - improves accuracy of the process (g) Sign check on debit and credit entries (h) Calculation of run-to-run totals can verify the accuracy of journal voucher batch processing (2) Reconciliation and control reports - can detect errors made during updating and processing; trial balances, clearing, and suspense accounts are examples (a) Balancing of control and subsidiary accounts (b) Control reports can help identify the source of errors in the general ledger update process - listings of journal vouchers and general journal entries will show entries posted to the general ledger and ensures equality of debits and credits (3) The audit trail - the path of transactions through the system-should be able to perform the following tasks: (a) Trace any transaction from its original source document to the general ledger; any other document or report using that data (b) Trace any item from a report or an output document to the general ledger and thence to the source document (c) Trace all changes in the general ledger balances from their beginning balance to their ending balance. THREAT 2: Loss or unauthorized disclosure or alteration of financial data - Controls: (1) User IDs, passwords, and access controls should be used (2) Enforce segregation of duties (3) Adjusting entries only from the controller's area (4) Valid authorization for journal voucher submission. THREAT 3: Loss or destruction of the general ledger - Controls: (1) Use of internal and external file labels to protect from accidental data loss (2) Make regular backup copies of the general ledger, one copy stored off-site (3) A good disaster recovery plan and (7) access and processing integrity controls to ensure confidentiality and accuracy of data transmitted to branch offices or externally. THREAT 3: Poor performance – Controls: (1) XBRL, (2) redesign business processes, and (3) redesign metrics used to report results of business activities. 61. The general ledger collects and reports financial information, and is it used to prepare the financial statements for an organization. The first statement that is prepared is the income statement. It is based on data from revenue and expense accounts that have been subject to adjustment. The adjusted trial balance is used to provide the balances used on the income statement (of course the adjusted trial balance is generated as part of the second step in the general ledger and reporting system). Revenue and expense accounts can then be "zeroed out" using closing entries, which will transfer any or loss to the retained earnings account. The balance sheet can then be prepared. The statement of cash flows is prepared after the balance sheet, because it uses data obtained from both the income statement and the balance sheet as well as other information about the organization's investing and financing activities.