BEC Accounting Cycle

Question 1

The accounting cycle begins by recording _____________ in the form of journal entries.

Answer 1

Business transactions (economic agreement between two entities to exchange goods or services or any other event that can be measured in economic terms)

Question 2

Accounting cycles:

Answer 2

1. Revenue cycle—Interactions with customers (give goods; get cash)
2. Expenditure cycle—Interactions with suppliers (give cash; get goods)
3. Production cycle—Give labor and raw materials; get finished product.
4. Human resources/payroll cycle—Hire, use, and develop labor; give cash and benefits.
5. General ledger, reporting, financing cycle—Give cash; get cash; report financial outcomes. Gets data from all cycles.

Question 3

Accounting cycle as set of accounting procedures:

Answer 3

1. Analyze transactions and business documents.
2. Journalize transactions.
3. Post journal entries to accounts.
4. Determine account balances and prepare a trial balance.
5. Journalize and post adjusting entries.
6. Prepare financial statements and reports.
7. Journalize and post closing entries.
8. Balance the accounts and prepare a post-closing trial balance.

Question 4

The most important document in the billing process is the

Answer 4

Sales invoice

Question 5

Hildegard works at Amazon in the warehouse. What is the screen called that she most likely uses to assemble the goods for customers’ orders for shipping?

Answer 5

Picking ticket, tells you items to be pulled from warehouse and then packing list tells you which items to ship and bill of lading is authorization to ship.

Question 6

____ is a legal contract that defines responsibility for goods that are in transit.

Answer 6

Bill of lading

Question 7

Core activities of revenue cycle:

Answer 7

1. Sales- Receive customer orders, Approve customer credit
2. Custody of Products/Services-Fill the order and prepare for shipping, Ship or deliver the product.
3. Accounts Receivables-Bill, Manage receivables (e.g., returns and allowances)
4. Cash- Collection and receipt of payments.

Question 8

Inherent risks of revenue cycle:

Answer 8

1. Revenue recognition- is it real? must be realized/realizable and earned
2. Are those receivables collectible?- estimating collectability is subjective
3. Customer returns and allowances- subjective

Question 9

Revenue cycle stakeholders:

Answer 9

1. Customers

2. Outbound logistics providers (ex. FedEx)

Question 10

Sales issues in revenue cycle:

Answer 10

1. Customer abandons order before completion
2. High payment processing fees
3. Incomplete/inaccurate customer orders- automate data entry, perform data entry checks
4. Fake sales or sales inconsistent with policy- appropriate authorization (receipt of signed purchase order), evidence of existing customer

Question 11

Receivables and account issues in revenue cycle:

Answer 11

1. Grand credit to undeserving customers-segregation of sales from credit checking
2. Failure to bill customers- need segregation of duties
3. Receivables inappropriately written off- segregation of sales and cash receipts from authorization to write-off
4. Billing and customer account errors

Question 12

Customer order/sales order

Answer 12

Documents order, including items, prices and stock numbers

Question 13

Customer invoice

Answer 13

Client’s bill

Question 14

Reggie is the purchasing agent for a wholesale paint store (Ye Ol’ Paint Pots) that sells only to large chains. Reggie’s cousin, Earl the Earl, owns a small paint store. Reggie arranged for paint to be delivered from paint manufacturers to Earl the Earl’s store, thereby allowing Earl the Earl to get the paint at a wholesale (cheaper) price, which violates a policy of Ye Ol’ Paint Pots. The control that is most likely to have prevented this violation of policy is:

Answer 14

Segregation of the receiving function from the purchasing function

Question 15

Core activities of expenditure cycle:

Answer 15

1. Request and Authorize Purchase
2. Acquire Goods
3. Take Custody and Pay for Goods
4. Return Needed? If so, return it and document the return.

Question 16

Stakeholders in expenditure cycle:

Answer 16

1. Suppliers

2. Inbound logistics providers

Question 17

Accounting/Business Risks and Controls in expenditure cycle:

Answer 17

1. Request and authorize purchase- controls to prevent fake vendors or unauthorized purchases
2. Acquire goods- only from approved suppliers
3. Take custody- segregation of receiving from other expenditure cycle activities
4. Pay for goods

Question 18

Purchase order (requisition)

Answer 18

Specify items ordered, freight terms, shipping address and other vendor information.

Question 19

Receiving report

Answer 19

Were goods received and in good condition?

Question 20

Voucher or voucher package

Answer 20

PO and receiving report

Question 21

Bill of materials

Answer 21

Specifies part number, description and quantity of each component used in making product.

Question 22

Master production schedule (MPS)

Answer 22

Plan indicating how much of each product to produce and when to produce it.

Question 23

Materials requisition

Answer 23

Authorize moving raw materials from storeroom to production.

Question 24

Move tickets

Answer 24

Identify parts to be transferred, their destination and time of transfer. Often part of scanning or RFID system.

Question 25

Operations list

Answer 25

Sequence of steps in making a product, which equip to use and how long each step requires.

Question 26

Requiring direct deposits instead of paying employees by checks improves accounting controls by:

Answer 26

Reducing the likelihood of the theft of payroll payments.

Question 27

Core activities of HR/Payroll cycle:

Answer 27

1. Recruiting and Hiring Employees- follow laws when hiring 2. Training and Developing Employees’ Skills-retaining high performers 3. Supervision and Job Assignments 4. Salaries and Benefits- compensation, benefits and taxes on wages and benefits 5. Monitoring and Evaluation 6. Transitions

Question 28

Cumulative earnings register

Answer 28

Accumulates YTD gross and net pay, and deductions by EE

Question 29

Workforce inventory

Answer 29

List of EEs by department

Question 30

Position control report

Answer 30

Lists each position, job qualifications, salary and status (filled or unfilled)

Question 31

Skills inventory report

Answer 31

List of EEs and current skills

Question 32

US Form 941

Answer 32

Employer's quarterly federal tax return (wages subject to tax and amounts withheld for income tax and FICA)

Question 33

US Form W-2

Answer 33

Report of wages and withholdings for each EE

Question 34

US Form W-3

Answer 34

Summary of all W-2 forms

Question 35

US Form 1-99 Misc

Answer 35

Report of income paid to indep contractors

Question 36

Reconciling the accounts receivable control and subsidiary accounts is useful in ensuring that:

Answer 36

All credit sales transactions are recorded. Because credit sales should appear in the subsidiary ledger (and obviously, in aggregate, in the control account), this activity will be useful in determining that all credit sales are recorded.

Question 37

In the accounting cycle, closing journal entries:

Answer 37

Transfer balances in temporary accounts to retained earnings.

Question 38

Adjusting journal entries are of additional concern when they are

Answer 38

Unusual and manually posted.

Question 39

General journal

Answer 39

Journal for recording non-routine (closing and reversal entries), very important to review for fraud

Question 40

Control and subsidiary accounts

Answer 40

Subsidiary accounts maintain the details and sum to control account balance.

Question 41

At what phase in the systems development process is a report generated that describes the content, processing flows, resource requirements, and procedures of a preliminary system design?

Answer 41

Conceptual systems design since it talks about a preliminary design.

Question 42

Purpose of the Systems Development Life Cycle (SDLC) method

Answer 42

Provides a structured approach to the systems development process by identifying key roles/responsibilities, establishing critical activities to measure progress and requires project review/approval at critical points.

Question 43

Roles in the SDLC method

Answer 43

1. IT Steering Committee— principal duty is to approve and prioritize systems proposals for development. 2. Lead Systems Analyst— responsible for all direct contact with the end user, developing the overall programming logic and functionality 3. Application Programmers— under direction of the lead analyst, responsible for writing/designing/creatingtesting program. 4. End Users- identify problems and propose initial solutions

Question 44

Stages of SDLC method:

Answer 44

Stage 1—Planning and Feasibility Study- includes critical success factors, scope, milestones and responsibilities Stage 2- Analysis- systems analysts work with end users to understand the business process and document the requirements (requirements definition document signed at this stage); collaboration of IT and end users to define the system is joint application development (JAD). Stage 3—Design—the technical specifications of the system are established Stage 4—Development—programmers use the systems design specifications to develop the program and data files Stage 5—Testing Stage 6- Implementation- includes moving data to new system and training EEs Stage 7-Maintenance

Question 45

Types of system implementation:

Answer 45

1. Parallel 2. Direct cutover, cold turkey 3. Phased- system divided up to implement 4. Pilot- EEs dividing into groups to implement

Question 46

Which of the following techniques would be used to verify that a program was free of unauthorized changes?

Answer 46

Source code comparison program, used to compare an archived version of the program to the program actually in use.

Question 47

An audit trail is considered what type of control?

Answer 47

Processing

Question 48

What is the primary objective of data security controls?

Answer 48

To ensure that storage media are subject to authorization prior to access, change or destruction.