Ch 7 General Ledger and Reporting System

Question 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

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

Who should provide the adjusting entries in 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

Which of the following user groups generally receive information produced by the general ledger and reporting system?

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

The general ledger system of an organization should be designed to serve the information requirements of both internal and external users. This means that the system should support

A) producing expansive regular periodic reports to cover all information needs.
B) the real-time inquiry needs of all users.
C) producing regular periodic reports and respond to real-time inquiry needs.
D) access by investors and creditors of the organization to general ledger balances.

Answer 5

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

Question 6

Identify the most correct statement with regard to how the various accounting subsystems update the general ledger.

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

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

Which of the following are used to document entries made to update the general ledger?

A) general journal
B) subsidiary journal
C) subsidiary ledgers
D) journal vouchers

Answer 8

D) journal vouchers

Question 9

Not all journal entries affect cash flow. Adjusting entries that reflect events that have already occurred, but have no effect on cash, are classified as

A) accruals.
B) deferrals.
C) revaluations.
D) corrections.

Answer 9

A) accruals.

Question 10

Recording interest earned on an investment is an example of which type of adjusting journal entry?

A) accrual entry
B) deferral entry
C) revaluation entry
D) correcting entry

Answer 10

A) accrual entry

Question 11

) Identify the adjusting entry that is made at the end of an accounting period to reflect an exchange of cash prior to the performance of a related event is classified as a(n)

A) accrual entry.
B) deferral entry.
C) revaluation entry.
D) correcting entry.

Answer 11

B) deferral entry.

Question 12

Depreciation expense and bad debt expense are examples of which type of adjusting journal entry?

A) deferrals
B) accruals
C) revaluations
D) estimates

Answer 12

D) estimates

Question 13

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 13

B) revaluations.

Question 14

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 14

B) corrections.

Question 15

) Corrections are entries made to correct errors found in

A) all journals.
B) special journals.
C) the general ledger.
D) the financial statements.

Answer 15

C) the general ledger.

Question 16

Immediately after the adjusting entries are posted, the next step in the general ledger and reporting system is to prepare

A) an adjusted trial balance.
B) closing entries.
C) financial statements.
D) an unadjusted trial balance.

Answer 16

A) an adjusted trial balance.

Question 17

Financial statements are prepared in a certain sequence. Which statement is prepared last?
A) the adjusted trial balance 
B) the income statement 
C) the balance sheet 
D) the statement of cash flows

Answer 17

D) the statement of cash flows

Question 18

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 18

A) a general ledger control report.

Question 19

Who generally is responsible for providing the accounting department with information about financing and investing activities to create the appropriate general ledger journal entries?
A) budget department
B) controller
C) treasurer
D) chief executive officer

Answer 19

C) treasurer

Question 20

Adjusting entries that are made to recognize revenue that has been received but not yet earned are classified as
A) estimates.
B) deferrals.
C) accruals.
D) revaluations.

Answer 20

B) deferrals.

Question 21

Adjusting entries that reflect a change in accounting principle used to value inventories are classified as
A) corrections.
B) estimates.
C) deferrals.
D) revaluations.

Answer 21

D) revaluations.

Question 22

) If you believe not all adjusting entries were posted in the general ledger, you should prepare a general ledger control report listing journal vouchers in
A) numerical sequence.
B) chronological order.
C) general ledger account number order.
D) any order, since you have to review them all anyway.

Answer 22

A) numerical sequence.

Question 23

If you believe a general ledger account was not adjusted properly or at all, you should prepare a general ledger control report listing journal vouchers in
A) numerical sequence.
B) chronological order.
C) general ledger account number order.
D) any order, since you have to review them all anyway.

Answer 23

C) general ledger account number order.

Question 24

Which of the following are appropriate controls for 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 24

D) All of the above are appropriate.

Question 25

A type of data entry control that would ensure that adjusting entries are posted to existing general ledger accounts is called a(n) \_\_\_\_\_\_\_\_ check. 
A) validity
 B) existence 
C) closed loop verification
D) reasonableness

Answer 25

A) validity

Question 26

One way of ensuring that recurring adjusting journal entries are made each month would be to
A) make all the entries a month in advance.
B) rotate the responsibility among the accounting staff.
C) program the entries to be made automatically.
D) create a standard adjusting journal entry file.

Answer 26

D) create a standard adjusting journal entry file.

Question 27

Which of the following tasks are facilitated by maintaining a strong and secure audit trail?
A) tracing a transaction from original source document to the general ledger to a report
B) tracing an item in a report back through the general ledger to the original source document
C) tracing changes in general ledger accounts from beginning to ending balances
D) All of the above are facilitated by the audit trail.

Answer 27

D) All of the above are facilitated by the audit trail.

Question 28

) Marina Filimena is an accountant at Jasmina Hair Products. Marina received the following error message while making an adjusting entry to the general ledger: "The account number referenced in your journal entry does not exist. Create a new account?" This is an example of a 
A) validity check.
B) closed loop verification.
C) zero-balance check.
D) completeness test.

Answer 28

A) validity check.

Question 29

Marina Filimena is an accountant at Jasmina Hair Products. Marina received the following error message while making an adjusting entry to the general ledger: "Your journal entry must be a numeric value. Please reenter." This is an example of a 
A) validity check.
B) field check.
C) zero-balance check.
D) completeness test.

Answer 29

B) field check.

Question 30

) Marina Filimena is an accountant at Jasmina Hair Products. Marina received the following error message while making an adjusting entry to the general ledger: "The amounts debited and credited are not equal. Please correct and try again." This is an example of a 
A) validity check.
B) field check.
C) zero-balance check.
D) completeness test.

Answer 30

C) zero-balance check.

Question 31

Marina Filimena is an accountant at Jasmina Hair Products. Marina received the following error message while making an adjusting entry to the general ledger: "The data you have entered does not include a source reference code. Please enter this data before saving." This is an example of a
A) validity check.
B) field check.
C) zero-balance check.
D) completeness test.

Answer 31

D) completeness test.

Question 32

Identify one way “rainbow tables” are often used.
A) to discover plaintext passwords associated with a hash
B) to integrate different tables into one, master table
C) to perform a zero-balance check
D) to ensure referential integrity of all the associated tables

Answer 32

A) to discover plaintext passwords associated with a hash

Question 33

What system privileges should an employee involved in the general ledger and reporting system be given?
A) general privileges to create, delete, update, or modify data
B) no privileges permitting the creation, deletion, updating, or modification of data
C) only the specific privileges necessary to perform an employee’s assigned duties
D) read-only privileges

Answer 33

C) only the specific privileges necessary to perform an employee’s assigned duties

Question 34

What control procedure(s) should be used to reduce the risk of unauthorized disclosure of the financial statements?
A) multifactor authentication
B) physical security
C) encryption
D) all of the above

Answer 34

D) all of the above

Question 35

What control procedure(s) should be used to reduce the risk of the destruction of financial statement master data?
A) multifactor authentication
B) backup and disaster recovery
C) encryption
D) all of the above

Answer 35

B) backup and disaster recovery

Question 36

True or False: It is important to verify that all temporary accounts have a zero balance at least two times during the time period covered by the financial statements.

Answer 36

FALSE

Question 37

) True or False: Periodic account reconciliations are a control that can be used to reduce the risk of employees creating unauthorized adjusting entries.

Answer 37

FALSE

Question 38

) Which of the following statements is not true regarding XBRL?
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 will require accountants and systems professionals tag data for their clients.

Answer 38

D) XBRL’s adoption will require accountants and systems professionals tag data for their clients.

Question 39

The benefits of XBRL include
A) organizations can publish financial information only once, using standard XBRL tags.
B) tagged data is readable and interpretable by computers, so users don’t need re-enter data into order to work with it.
C) Both are benefits of XBRL.
D) Neither is a benefit of XBRL.

Answer 39

C) Both are benefits of XBRL.

Question 40

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) pdf file. 
D) XBRL.

Answer 40

D) XBRL.

Question 41

Which of the following statements is not true about an XBRL instance document?
A) An instance document includes instruction code as to how the document should be physically arranged and displayed.
B) An instance document contains facts about specific financial statement line items.
C) An instance document uses separate tags for each specific element.
D) An instance document can be used to tag financial and nonfinancial elements.

Answer 41

A) An instance document includes instruction code as to how the document should be physically arranged and displayed.

Question 42

IFRS is an acronym for what?
A) International Financial Reporting Standards
B) Internal Forensic Response System
C) Input and Financial Reporting Standards
D) Internal Fault Recovery System

Answer 42

A) International Financial Reporting Standards

Question 43

Which of the following is true about IFRS?
A) There is a global trend towards using IFRS for reporting purposes, though U.S. companies are not currently required to do so.
B) The switch to IFRS is required by the Sarbanes-Oxley Act.
C) IFRS is only slightly different than U.S. GAAP.
D) The switch to IFRS is cosmetic only—there isn’t any real impact on AIS.

Answer 43

A) There is a global trend towards using IFRS for reporting purposes, though U.S. companies are not currently required to do so.

Question 44

Which of the following scenarios will not be allowed under IFRS?
A) A landscaping and garden retail store keeps piles of river rock, gravel, paving stones, and small decorative rocks in a fenced area on the side of the store. The store uses the most recent inventory costs when calculating cost of goods sold, since new inventory is piled on top of the older inventory.
B) A grocery store strictly enforces a shelf rotation policy, so that older inventory is always at the front and sold first. The store uses the oldest inventory costs to calculate cost of goods sold.
C) A farm chemical supplier maintains a large holding tank of chemicals, into which deliveries are periodically combined with the older chemicals. The supplier averages the cost of all inventory to calculate cost of goods sold.
D) All of the above are acceptable under IFRS.

Answer 44

A) A landscaping and garden retail store keeps piles of river rock, gravel, paving stones, and small decorative rocks in a fenced area on the side of the store. The store uses the most recent inventory costs when calculating cost of goods sold, since new inventory is piled on top of the older inventory.

Question 45

Which of the following is true about accounting for fixed assets?
A) Depreciation expense under IFRS will likely be higher than under GAAP, because acquisitions of assets with multiple components must be separately depreciated under IFRS, whereas under GAAP assets could be bundled and depreciated over the longest of the useful life for any of the components.
B) IFRS doesn’t allow capitalization of any asset that separately accounts for less than 20% of total assets.
C) Depreciation expense under IFRS will likely be less than under GAAP, because standards for depreciable lives on asset classes are much longer than under GAAP.
D) IFRS and GAAP account for fixed assets in much the same way.

Answer 45

A) Depreciation expense under IFRS will likely be higher than under GAAP, because acquisitions of assets with multiple components must be separately depreciated under IFRS, whereas under GAAP assets could be bundled and depreciated over the longest of the useful life for any of the components.

Question 46

Identify the year the SEC will require American companies to switch from U.S.-based GAAP to IFRS as the basis for preparing financial statements.
A) 2016
B) 2018
C) 2020
D) At this point it is unclear when the SEC will require American companies to implement IFRS, though the SEC remains committed to requiring U.S. companies use IFRS at some point.

Answer 46

A) 2016

Question 47

A major way in which IFRS differs from GAAP that will affect the design of a company's general ledger and reporting system is an IFRS principle known as 
A) componentization.
B) monetization.
C) securitization.
D) none of the above

Answer 47

A) componentization.

Question 48

At a minimum, a switch to IFRS from GAAP will affect companies’ accounting information system by
A) requiring companies to increase the processing power of their existing accounting information systems.
B) requiring IT departments to hire programmers that are fluent in languages besides English.
C) requiring the creation of additional fields in research and development (R&D) records to capture information about the stage of research and development that costs are incurred in.
D) requiring firms to completely redesign their existing accounting information systems because current systems are not compatible with IFRS accounting principles.

Answer 48

C) requiring the creation of additional fields in research and development (R&D) records to capture information about the stage of research and development that costs are incurred in.

Question 49

XBRL stands for 
A) extensible business reporting language.
B) extreme business reporting ledgers.
C) external business reporting language.
D) extensive business report logic.

Answer 49

C) external business reporting language.

Question 50

True or False: The SEC requires U.S. companies to use XBRL when submitting their filings.

Answer 50

TRUE

Question 51

Each specific data item in an XBRL document is called a(n)
A) taxonomy.
B) element.
C) instance.
D) schema.

Answer 51

B) element.

Question 52

The \_\_\_\_\_\_\_\_ is the managerial report that shows planned cash inflows and outflows for major investments or acquisitions. 
A) journal voucher list
B) statement of cash flows
C) operating budget
D) capital expenditures budget

Answer 52

D) capital expenditures budget

Question 53

The operating budget
A) compares estimated cash flows from operations with planned expenditures.
B) shows cash inflows and outflows for each capital project.
C) depicts planned revenues and expenditures for each organizational unit.
D) is used to plan for the purchase and retirement of property, plant, and equipment.

Answer 53

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

Question 54

) Budgets used for internal planning purposes and performance evaluation should be developed on the basis of
A) responsibility accounting.
B) generally accepted accounting principles.
C) financial accounting standards.
D) managerial accounting standards.

Answer 54

A) responsibility accounting.

Question 55

Performance reports for cost centers should compare actual versus budget \_\_\_\_\_\_\_\_ costs. 
A) controllable 
B) uncontrollable 
C) fixed 
D) variable

Answer 55

A) controllable

Question 56

Performance reports for sales departments should compare actual revenue versus budgeted
A) revenue.
B) cost.
C) return on investment.
D) profit.

Answer 56

A) revenue.

Question 57

Departments that mostly provide services to other units and charge those units for services rendered should be evaluated as \_\_\_\_\_\_\_\_ centers. 
A) cost 
B) profit 
C) investment 
D) revenue

Answer 57

B) profit

Question 58

As responsibility reports are rolled up into reports for higher level executives, they
A) become less detailed.
B) become more detailed.
C) become narrower in scope.
D) look about the same.

Answer 58

A) become less detailed.

Question 59

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 59

B) to use flexible budgeting.

Question 60

Which of the following balanced scorecard dimensions provides measures on how efficiently and effectively the organization is performing key business processes? 
A) financial 
B) internal operations 
C) innovation and learning 
D) customer

Answer 60

B) internal operations

Question 61

Which of the following is not one of the principles of proper graph design for bar charts?
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 61

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

Question 62

Which of the following statements is true about the chart below?

A) The x-axis is in reverse chronological order, which violates a principle of proper graph design.
B) The chart appears to conform to the principles of proper graph design.
C) The vertical axis doesn’t appear to start at the origin (zero).
D) The chart used 2-D bars instead of 3-D, which violates a principle of proper graph design.

Answer 62

A) The x-axis is in reverse chronological order, which violates a principle of proper graph design.

Question 63

The balanced scorecard attempts to solve what major issue associated with traditional accounting reports?
A) Traditional accounting reports focus too narrowly on financial performance.
B) Traditional accounting reports are not easily understood by non-accountants.
C) Traditional accounting reports are expensive to produce.
D) Traditional accounting reports are produced too slowly to provide value.

Answer 63

A) Traditional accounting reports focus too narrowly on financial performance.

Question 64

Which of the following is not a perspective reflected in the balanced scorecard?
A) customer perspective
B) internal operations perspective
C) financial perspective
D) efficiency and effectiveness perspective

Answer 64

D) efficiency and effectiveness perspective

Question 65

) True or False: Organizations should set their balanced scorecard targets to reflect industry benchmark values.

Answer 65

FALSE

Question 66

Which type of graph is the most commonly used to display trends in financial data?
A) pie chart
B) scatterplot chart
C) bar chart
D) stochastic chart

Answer 66

C) bar chart

Question 67

Which of the following balanced scorecard dimensions provides measures on new products?
A) financial 
B) internal operations 
C) innovation and learning 
D) customer

Answer 67

C) innovation and learning