Deck 7: Accounting Information Systems

Question 1

The difference in the sales journal between the perpetual and periodic inventory systems is a column to record ___________________________ and __________________ for each sale. This column is used in the perpetual system but not in the periodic.
________________________________________

Answer 1

Chapter 07 Accounting Information Systems Answer Key
True / False Questions

Question 2

Accounting information systems are so accurate that decision makers in practice do not need a basic knowledge of how the systems work.

Answer 2

False

Question 3

The following information is available for AllBev, Inc. (all amounts are in millions):

Answer 3

a. Determine the segment return on assets for each geographic segment.
b. Comment on the results. How do the segments compare with respect to profitability?
c. What measures could be taken to improve segment return?

Question 4

Philip Company uses special journals to record transactions. Below are the sales journal and cash receipts journal for Philip. Prepare the following:
a. Open an accounts receivable subsidiary ledger having a T-account for each customer. Post the invoices to the subsidiary ledger.
b. Open an Accounts Receivable controlling T-Account. Post the end-of the month totals that affect the Accounts Receivable account only.
c. Prepare a schedule of accounts receivable and prove that its total equals the Accounts Receivable controlling account balance.

Question 5

Lester Company uses special journals to record transactions. All of the companies listed below supply inventory to Lester except Harry Co. that supplies equipment. Use the purchases journal given below to answer the following questions:
a. Foot and crossfoot the journal for accuracy.

Question 6

Williams Company began business on May 1. They use the perpetual inventory method. The following transactions involving purchases and cash disbursements occurred during the first week of May.

Question 7

Argon Sales uses special journals to record business transactions. Argon sells construction equipment. Argon completed the following transactions a through j. Identify the journal in which each transaction should be recorded.

Question 8

The following information is available for Bosc, Inc. (all amounts are in millions):

Question 9

The Sun Company completed the following sales and cash receipts transactions during the first week of December. The Sun Company uses the periodic inventory system.

Question 10

The following special journal is taken from a merchandising company that uses the perpetual inventory system:

Question 11

Williams Company began business on May 1. They use the periodic inventory method. The following transactions involving purchases and cash disbursements occurred during the first week of May.

Question 12

The five basic principles of accounting information systems are control, competency, compatibility, flexibility and cost-benefit.

Question 13

A company uses four special journals: purchases, sales, cash receipts, and cash disbursements. The following transactions were incurred during August:

Question 14

Outdoors Unlimited uses special journals to record its daily transactions. They use the perpetual inventory system. Shown below is its cash receipts journal and selected ledger accounts. Post the cash receipts journal to the appropriate ledger accounts.

Question 15

The Sun Company completed the following sales and cash receipts transactions during the first week of December. The Sun Company uses the perpetual inventory system.

Question 16

A company records its transactions and events in four special journals and a general journal. The company completed the following transactions a through j. Identify the journal in which each transaction should be recorded.

Question 17

Medco Company uses special journals to record transactions. Medco uses the perpetual inventory system. Journalize the following transactions in the appropriate special journal. All credit sales have 2/10, n/30 terms.

Question 18

Accounting information systems collect and process data from transactions and events, organize them in useful reports, and communicate results to decision makers.

Question 19

Renton Co. uses special journals to record its transactions. They use the perpetual inventory system. Shown below are the purchasing and cash disbursement transactions for current month of May: Record these transactions in the following journals.

Question 20

The Woodview Company uses a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and general journal. They use the periodic inventory method. The following transactions occurred during the month of December:

Question 21

Auditors rely on accounting system databases when they audit financial statements and a company's controls.

Question 22

Accounting information systems are designed to capture information about a company's transactions and events and to provide output including financial, managerial, and tax reports.

Question 23

Due to electronic files and Web communications, source documents are no longer required.

Question 24

The purchases journal is used to record cash purchases of merchandise.

Question 25

When posting from special journals each debit and credit entry is entered as a separate amount in the general ledger.

Question 26

The general journal is used for transactions not covered by special journals and for adjusting, closing, and correcting entries.

Question 27

Most transactions for merchandising businesses fall into four groups: sales, purchases, cash receipts, and cash disbursements.

Question 28

With on-line systems, all information storage should be off-line to protect the data.

Question 29

Accounting information processes are structured to eliminate the need for professional judgment.

Question 30

Input devices are the means to make accounting information available to users.

Question 31

The flexibility principle prescribes that an accounting information system conform with a company's activities, personnel, and structure and adapt to a company's unique characteristics.

Question 32

Special journals allow an efficient division of labor, which is also an effective control procedure.

Question 33

Input devices include journal entries, keyboards, scanners, and modems.

Question 34

Accurate source documents are crucial to accounting systems to limit the possibility of entering faulty data into the system.

Question 35

The cost-benefit principle prescribes that the benefits from an activity in an accounting information system outweigh the costs of that activity.

Question 36

The compatibility principle requires that an accounting system report useful, understandable, timely, and pertinent information for effective decision making.

Question 37

With advanced technology there is no need to trace information that has been entered into an accounting information system to its source.

Question 38

A special journal is used to record and post transactions of a similar type.

Question 39

A sales journal is used to record cash sales.

Question 40

Internal controls include policies to direct operations toward common goals, procedures to ensure reliable financial reports, safeguards to protect company assets and methods to achieve compliance with laws and regulations.

Question 41

A business segment is a part of a company that is separately identified by its products or services, or by the geographic market it serves.

Question 42

Special journals are designed in a manner that is best suited for each business, so good systems design for a business could include collapsing the sales and cash receipts journal into one journal.

Question 43

Subsidiary ledgers are not needed in perpetual inventory systems because the accounting system captures sufficient details to support analyses that decision makers need.

Question 44

External users of financial statements are generally uninterested in segment information to understand a company's business activities.

Question 45

Equipment, inventory, and investments are other accounts that can include detailed information in a subsidiary ledger.

Question 46

The accounts payable ledger is used for storing transactions data regarding individual customers.

Question 47

Segment information is often useful to investors for evaluating a company's profitability, risk, and growth.

Question 48

Most companies use batch processing instead of online processing because batch processing immediately updates databases.

Question 49

Two common subsidiary ledgers are cash receipts and cash disbursements.

Question 50

Individual transactions in the sales journal are regularly posted to customer accounts in the accounts payable ledger.

Question 51

A subsidiary ledger is a listing of individual accounts with a common characteristic.

Question 52

Enterprise resource planning software is primarily used for recording journal entries.

Question 53

Off-the-shelf accounting software is not adequate to meet the needs of small businesses.

Question 54

An advantage of online processing is up-to-date databases.

Question 55

A columnar journal is any journal with only one column.

Question 56

The SAP enterprise-resource planning software is already being used to help direct the operations of many of the world's largest companies.

Question 57

Enterprise resource planning software packages include the programs that manage a company's vital operations.

Question 58

The accounts payable ledger has a controlling account in the general ledger and a separate subsidiary account for each creditor in the accounts payable ledger.

Question 59

Computer networks are links among computers giving different users and different computers access to common databases and programs.

Question 60

Segment return on assets is segment operating income divided by segment average assets.

Question 61

To check for accuracy after posting: first a trial balance is completed, then, the subsidiary ledgers are tested by preparing a schedule of the controlling account.

Question 62

Three transactions that would be recorded in the sales journal are: (1) recording sales taxes (2) recording sales returns and allowances and (3) recording purchases discounts.

Question 63

All of the following statements regarding accounting information systems are true except:

A) Accounting information systems collect and process data from transactions and events.
B) Accounting information systems organize data in useful forms.
C) Accounting information systems do not establish internal control procedures.
D) Accounting information systems are crucial to effective decision making.
E) Accounting information systems communicate information to business decision makers.

Question 64

All of the following statements regarding accounting information systems are true except:

A) Accounting information systems consist of people, records, methods, and equipment.
B) Accounting information systems have the same goals and share basic components.
C) Accounting information systems are less important than ever to decision makers.
D) Accounting information systems are designed to provide output including financial, managerial, and tax reports.
E) Accounting information systems are designed to capture information about a company's transactions.

Question 65

The purchases journal is identical under both the periodic and the perpetual inventory systems.

Question 66

The difference in the sales journal between the perpetual and periodic inventory systems is that a column is used to record cost of goods sold and inventory amounts for each sale under the perpetual system but not the periodic system.

Question 67

If the total balance of the accounts receivable ledger equals the total of the controlling Accounts Receivable account, then the accounts are presumed to be correct.

Question 68

Source documents:

A) Are input devices.
B) Provide the basic information processed by an accounting system.
C) Cannot be electronic files.
D) Store processed information for future use.
E) Cannot be paper documents.

Question 69

All of the following statements regarding internal control procedures are true except:

A) Internal control procedures are designed to ensure reliable financial reports.
B) Internal control procedures are designed to safeguards company assets.
C) Internal control procedures direct operations toward common goals.
D) Internal control procedures include methods to achieve compliance with laws and regulation.
E) Internal control procedures are bit affected by the cost-benefit principle.

Question 70

A schedule of accounts receivable is a listing of all creditor accounts and account balances.

Question 71

The basic components of an accounting information system include all of the following except:

A) Source documents.
B) Warehouses.
C) Information processors.
D) Information storage.
E) Input devices.

Question 72

The control principle for accounting information systems requires that the:

A) Benefits from an activity outweigh the costs of the activity.
B) System report useful, understandable, timely, and pertinent information for effective decision making.
C) System must have internal controls.
D) System adapts to changes in the company, business environment, and needs of decision makers.
E) System conforms to a company's activities, personnel, and structure.

Question 73

The five fundamental principles of accounting information systems are:

A) Control, accountability, relevance, compatibility, and flexibility.
B) Historical cost, relevance, compatibility, flexibility, and cost-benefit.
C) Control, relevance, compatibility, flexibility, and safety.
D) Control, relevance, compatibility, timeliness, and cost-benefit.
E) Control, relevance, compatibility, flexibility, and cost-benefit.

Question 74

The flexibility principle of accounting information systems prescribes that the:

A) Benefits from an activity outweigh the costs of the activity.
B) System report useful, understandable, timely, and pertinent information for effective decision making.
C) System aid managers in controlling and monitoring business activities.
D) System be able to adapt to changes in the company, business environment, and needs of decision makers.
E) System conforms to a company's activities, personnel, and structure.

Question 75

The accounting principle that prescribes an accounting information system to report useful, understandable, timely, and pertinent information for effective decision-making is the:

A) Control principle.
B) Compatibility principle.
C) Relevance principle.
D) Flexibility principle.
E) Cost-Benefit principle.

Question 76

A company using the periodic inventory system does not record the increase in cost of goods sold and decrease in inventory at the time of each sale in the sales journal.

Question 77

Posting debits from the Sales journal to Accounts Receivable twice - once to the general ledger account Accounts Receivable and once to the customer's subsidiary account - violates the accounting equation of debits equal credits.

Question 78

Each transaction recorded in the sales journal yields a debit to Accounts Receivable and a credit to Sales.

Question 79

A procedure called direct posting of sales invoices can substitute for the sales journal.

Question 80

Account balances in the general ledger and the subsidiary ledgers should be proved for accuracy after posting is complete.