Test bank accounting 25th editon warren chapter 5 accounting systems

Chapter 5--Accounting Systems
Student: ___________________________________________________________________________
1. Businesses must implement controls to help guide the behavior of their employees toward business
objectives.
True False

2. The methods or procedures used to record and report financial data are called the accounting system.
True False

3. Systems analysis is the final phase in the creation or revision of an accounting system.
True False

4. Processing methods are the means by which the system collects, summarizes, and reports accounting
information.
True False

5. Accounting systems evolve through a three-step process: analysis, design and feedback.
True False

6. An accounting system is the methods and procedures used to collect, classify, summarize, and report the
businesses financial information
True False

7. Most accounting systems evolve as the business grows and requires changes in their methods for collecting,
accumulating, and reporting information.
True False

8. Once an accounting system has been implemented, feedback will be used to continuously analyze and
improve the system.
True False

9. Analysis of user needs is the final phase in the creation or revision of an accounting system.
True False

10. When specialized journals are used, the general journal is not necessary.
True False

11. Specialized journals are books of original entry.
True False

12. Transactions must first be recorded into the general journal before they can be entered into specialized
journals.
True False

13. The format and number of specialized journals that a business uses depends upon the legal organization of
the business.
True False

14. The basic procedure of posting from a revenue journal is to make all postings at the end of the month.
True False

15. The principal ledger that contains all the balance sheet and income statement accounts is the general ledger.
True False

16. The presence of a subsidiary ledger requires the presence of a summarizing controlling account.
True False

17. The account for each supplier of merchandise will appear in the accounts payable subsidiary ledger.
True False

18. The customers subsidiary ledger is controlled by the general ledger account entitled Accounts Payable.
True False


19. When a sale for $1,350 takes place, with a $250 deposit having been received in advance, only the $1,100
on account is recorded into the Revenue journal.
True False

20. Purchases of store equipment on account are recorded in the general journal.
True False

21. A controlling account is used to record the details of the individual accounts.
True False

22. A cash refund paid to a customer who overpaid an account receivable is recorded in the cash payments
journal.
True False

23. A personal withdrawal of cash is recorded in the general journal.
True False

24. Services provided for cash is recorded in the revenue journal.
True False

25. Services provided on account is recorded in the revenue journal.
True False

26. Sales of office supplies for cash, at cost, to a neighboring business as an accommodation, are recorded in the
revenue journal.
True False

27. The Other Accounts column in the Cash Receipts journal is used for recording debits to any account for
which there is no special debit column.
True False


28. The Other Accounts column in the Cash Payments journal is used for recording debits to any account for
which there is no specialized debit column.
True False

29. Purchase journals will have an Other Accounts Cr. column.
True False

30. The use of subsidiary ledgers is limited to Accounts Payable and Accounts Receivable.
True False

31. The revenue journal is to make it more efficient to record sales transactions made for cash.
True False

32. The post reference column of the revenue journal will reference the account number of the customer.
True False

33. The total of the accounts receivable subsidiary accounts and the account receivable controlling account
should balance to each other at the end of the period.
True False

34. Adjusting journal entries are recorded in a special journal.
True False

35. Closing journal entries are recorded in the general journal.

True False

36. The accounts receivable subsidiary ledger is an example of a special journal.
True False

37. Posting from a revenue journal to the customer account is normally done only at the end of the month.
True False


38. The purchase of supplies for cash would be recorded in the purchases journal.
True False

39. When a large number of individual accounts with a common characteristic are grouped together, accounting
calls this a controlling account.
True False

40. The customers ledger and the creditors ledger refer to subsidiary ledgers.
True False

41. The total on the "Accounts Payable Creditors Balances" report at January 31, the end of the first month of
operations, agrees with the total of the Accounts Payable debit column in the cash payments journal for the
same period.
True False

42. The accounts included on specialized journals should not be customized for a businesses particular
activities.
True False

43. Generally, subsidiary ledgers are used for accounts that consist of a large number of individual items.
True False

44. Updating information in a computerized accounting system happens at the end of the month.
True False

45. In computerized accounting systems, reports may be generated at any time.
True False

46. Computerized accounting systems prevent all journalizing errors.
True False


47. Using the Internet to perform business transactions is called e-commerce.
True False

48. The term B2C refers to transactions conducted between two companies.
True False

49. E-commerce provides business opportunities at a higher cost.
True False

50. One way to report revenue earned by a company is to present it by the different segments of business.
True False

51. Match the transaction below with the journal or ledger in which it would be entered.
1. monthly adjustment for supplies used
2. record payment made to vendor
3. record sale on account to customer
4. cash receipt posting to an individual
customer account
5. record purchase on account from

vendor
6. cash payment posting to an individual
vendor account
7. record payment received from customer

General journal ____
Accounts receivable
subsidiary ledger ____
Revenue journal ____
Purchase journal ____
Cash receipts journal ____
Cash payments journal ____
Accounts payable subsidiary
ledger ____

52. Match the following types of journal transactions with the journal in which it would be entered.
1. Equipment purchased on account
2. Adjusting entry
3. Sale on account
4. Payment for supplies bought on account
5. Collection on account

Revenue journal
Cash payments journal
General journal
Cash receipts journal
Purchases journal

____
____

____
____
____


53. Select the correct subsidiary ledger and appropriate posting for each of the following customer and creditor
activities.
1. Accounts receivable subsidiary ledger;
Accounts receivable CR
2. Accounts receivable subsidiary ledger;
Accounts receivable DR
3. No subsidiary ledger posting
4. Accounts payable subsidiary ledger;
Accounts payable CR
5. Accounts payable subsidiary ledger;
Accounts payable DR

Sales on account
Collections from customers
on account
Purchases on account
Payments to creditors on
account
Adjusting entry for expired
insurance

____
____
____
____

____

54. A(n) ___________ system is the methods and procedures for collecting, classifying, summarizing and
reporting a business’s financial and operating information.
A. accounting
B. fiduciary
C. operations
D. auditing

55. The phase of accounting system installation in which the information needs of people in the organization are
taken into account is
A. analysis
B. design
C. implementation
D. installation

56. Which of the following is not one of the three phases needed when changing an accounting system, either in
its entirety or in part?
A. analysis
B. design
C. review
D. implementation

57. Which of the following is not part of a three-step process that a growing business uses for the evolution of
its accounting systems?
A. analysis
B. design
C. implementation
D. feedback

58. The three phases of setting up an accounting system are, in order
A. design, implementation, analysis
B. analysis, design, implementation
C. design, analysis, implementation
D. implementation, design, analysis

59. The goal of systems analysis is to determine
A. when to implement a system
B. information needs
C. the size of the competitor's system
D. changes to the present system

60. Which of the following is not an element of internal controls?
A. to protect assets from misuse
B. ensure the accuracy of business information
C. ensure that laws and regulations are followed
D. ensure that company policies are in place to maximize profits

61. After an accounting system has been set up, what is the next step?
A. Analysis
B. Feedback
C. Implementation
D. Internal controls

62. The means by which the accounting system collects, summarizes, and reports accounting information is
called information
A. reporting methods
B. accounting methods
C. control methods

D. processing methods

63. The primary ledger containing all the balance sheet and income statement accounts is the
A. general ledger
B. creditors ledger
C. customers ledger
D. subsidiary ledger


64. The subsidiary ledger that includes customer account activity is called the
A. asset ledger
B. accounts payable ledger
C. expense ledger
D. accounts receivable ledger

65. Every controlling account must have its own
A. revenue ledger
B. general ledger
C. subsidiary ledger
D. journal

66. At the end of the month, the total of the amount column of the revenue journal is posted as a
A. debit to Accounts Receivable and a credit to Cash
B. debit to Accounts Receivable and a credit to Fees Earned
C. debit to Cash and a credit to Fees Earned
D. debit to Cash and a credit to Accounts Payable

67. The controlling account in the general ledger that summarizes the debits and credits to the individual
customers accounts in the subsidiary ledger is entitled
A. Purchases

B. Accounts Payable
C. Fees Earned
D. Accounts Receivable

68. When there are a large number of individual accounts with a common characteristic, it is common to place
them in a separate ledger called a(n)
A. General ledger
B. Income Statement Ledger
C. Group Ledger
D. Subsidiary Ledger

69. A purchase of supplies for cash is recorded in the
A. Revenue journal
B. Purchases journal
C. Cash Receipts journal
D. Cash Payments journal


70. A purchase of supplies on account is recorded in the
A. Revenue journal
B. General journal
C. Purchases journal
D. Cash Payments journal

71. Which of the following transactions is recorded in the purchases journal?
A. purchase of store supplies on account
B. return of damaged office equipment
C. purchase of store supplies for cash
D. purchase of office equipment for cash

72. When posting a column total in the purchases journal, a credit should be posted to
A. Merchandise Inventory
B. Accounts Payable
C. Sales Returns and Allowances
D. Cash

73. In which journal would an adjustment for an overcharge by a creditor be recorded?
A. General journal
B. Purchases journal
C. Cash Payments journal
D. Cash Receipts journal

74. Which of the following transactions is recorded in the revenue journal?
A. sale of excess office equipment for cash
B. rendering services for cash
C. rendering services on account
D. sale of excess office equipment on account

75. Each individual entry in the Revenue Journal is posted to
A. the Accounts Receivable controlling account
B. the accounts receivable subsidiary ledger
C. the Revenue controlling account
D. the accounts receivable subsidiary ledger and the controlling account


76. Which of the following is always recorded in the general journal?
A. services rendered for cash
B. correction of error in billing client
C. purchases of equipment on account
D. purchases of equipment for cash

77. Which of the following is always recorded in the general journal?
A. rendering services for cash
B. purchases of supplies on account
C. rendering services on account
D. closing entries

78. Which of the following is recorded in the cash receipts journal?
A. cash withdrawn by the owner
B. cash purchase of equipment
C. cash received on customer's account
D. adjusting entry for depreciation

79. Services performed for cash should be recorded in the
A. Revenue journal
B. Purchases journal
C. Cash Receipts journal
D. Cash Payments journal

80. Which of the following is recorded in the cash payments journal?
A. adjusting entry for accrued salaries
B. receipt of cash on supplies returned
C. receipt of cash from services rendered
D. payment of employees' salaries

81. A Cash Payments journal would not include a
A. Cash credit column
B. Sales Discounts credit column
C. Accounts Payable debit column
D. Other Accounts debit column

82. In which journal is the return of supplies purchased on account recorded?
A. General journal
B. Cash Receipts journal
C. Cash Payments journal
D. Purchases journal

83. A cash purchase of supplies should be recorded in the
A. Cash Receipts journal
B. Purchase journal
C. General journal
D. Cash Payments journal

84. When posting the column totals of a cash payments journal, a debit should be posted to
A. Cash
B. Accounts Payable
C. Sales Discounts
D. Unearned Revenue

85. In which journal is the receipt of a promissory note from a customer on account recorded?
A. Revenue journal
B. Cash Receipts journal
C. General journal
D. Purchases journal

86. Subsidiary ledgers
A. are used only for Accounts Payable and Accounts Receivable
B. may be used for various ledger accounts
C. may be used for only for the Cash account

D. are never used for more than four accounts

87. Some of the more common subsidiary ledgers are:
A. Accounts Payable, Accounts Receivable, and Owner’s Equity subsidiary ledgers.
B. Accounts Receivable and Accounts Payable subsidiary ledgers.
C. Accounts Receivable, Accounts Payable, Cash, Checking, Petty Cash, and Owner’s Equity subsidiary
ledgers.
D. Cash and Owner’s Equity subsidiary ledgers.


88. If the individual subsidiary ledger accounts of Accounts Receivable and Accounts Payable contained the
following data:
Cadence Company - Vendor - $250 credit balance
Franklin Enterprises - Customer - $750 debit balance
Marcelo Construction - Client - $125 - debit balance
Peyton Supplies - Supplier - $375 - credit balance
The Accounts Receivable (A/R) controlling account and the Accounts Payable (A/P) controlling account
balances would be:
A. A/R - $1,000, A/P - $500
B. A/R - $625, A/P - $875
C. A/R - $875, A/P - $625
D. A/R - $750, A/P - $750

89. Which of the following is not considered a special journal?
A. purchases journal
B. cash receipts journal
C. general journal
D. cash payments journal

90. Which of the following journals is called an all-purpose journal?

A. General journal
B. Purchases journal
C. Revenue journal
D. Accounting journal

91. Which of the following is true about the revenue journal?
A. cash revenues and revenues on account are recorded in the revenue journal
B. only cash revenues are recorded in the revenue journal
C. only revenues on account are recorded in the revenue journal
D. unearned revenues are also recorded in the revenue journal

92. The cash receipts journal will be used for
A. only cash received from customers on account.
B. all cash received.
C. cash received from customers on account and cash sales.
D. only cash received from cash sales.


93. An “Accounts Receivable Subsidiary Ledger” report shows
A. revenues by customer for a specified date range.
B. cash receipts by customer for a specified date range.
C. cash payments to creditors for a specific date range.
D. sales by customer as of a specific date.

94. A cash investment made by the owner should be recorded on the
A. cash receipts journal
B. purchases journal
C. cash payments journal
D. revenue journal

95. A withdrawal of cash made by the owner will be found in the
A. cash receipts journal
B. cash payments journal
C. revenue journal
D. purchases journal

96. An owner transfers a personal automobile to the company with a fair market value of $12,000. The entry
will be made in the
A. purchases journal
B. cash payments journal
C. cash receipts journal
D. general journal

97. In which journal would adjusting entries be found?
A. cash receipts journal
B. cash payments journal
C. general journal
D. purchases journal

98. In which journal would you find cash revenues recorded?
A. cash payments journal
B. general journal
C. revenues journal
D. cash receipts journal


99. In which journal would the payment of salaries be posted?
A. cash receipts journal
B. special journal
C. cash payments journal

D. expense journal

100.
The following cash receipts headings have been suggested for Tower Tree-Trimming Service Company. Which
of the following statements is false?

Date

Account Debited Post.
Ref.

Accounts Receivable Cr. Cash
Cr.

Other Accounts Dr.

A. The second column should be Account Credited.
B. The Cash column should be a debit.
C. The Other Accounts column should be a credit.
D. The Accounts Receivable column should be a debit.
101. Which of the following is NOT a special journal?
A. cash receipts
B. purchases
C. accounts receivable
D. cash payments

102. Which of the following accounts normally has a subsidiary ledger?
A. capital stock
B. retained earnings
C. supplies

D. accounts payable

103. Which transaction is normally recorded in a special journal?
A. sales returns
B. depreciation expense
C. purchases on account
D. issued stock dividend


104. An adjustment resulting from a creditor charging too much for merchandise would be recorded in the:
A. general journal
B. purchases journal
C. cash payments journal
D. cash receipts journal

105. The total on the "Cash Receipts" report at January 31 should equal
A. the total revenue earned for the month of January.
B. the total of the purchases journal on January 31.
C. the total of the Cash Debit column of the cash receipts journal.
D. the balance in Accounts Receivable at January 31.

106. Processing methods:
A. are the policy and procedures that protect assets from misuse.
B. must be computerized.
C. are the means by which the accounting system reports information.
D. ensure that business laws and regulations are followed.

107. If a company uses special journals
A. it must have one for cash, receivables, and payables
B. it may have no more than four

C. the quantity and design depend on the needs of the company
D. the design must comply with the FASB requirements

108. Computerized accounting systems
A. are only used by medium and large sized companies
B. are generally not as accurate as manual systems
C. record and post transactions at the same time
D. must make use of special journals

109. Mocha Coffee Shop has asked the accountant to keep track of the purchases for beverage, food, and retail
items. The accountant has implemented a purchases journal. Which of the following columns should be
included in the new purchases journal?
A. Accounts Payable - Cr., Beverage Supplies - Dr, Food Supplies - Dr, Retail Items Supplies - Dr, Other - Dr.
B. Accounts Payable - Dr, Other - Dr, Beverage Supplies - Cr, Food Supplies -Cr, Retain Items Supplies - Cr.
C. Beverage Supplies - Dr, Food Supplies - Dr, Retail Items Supplies - Dr, Other - Dr, Cash - Cr.
D. Beverage Supplies - Dr, Food Supplies - Dr, Retail Items Supplies - Dr, Other - Cr, Accounts Payable - Dr.


110. Beachside Coffee Shop, in an effort to stream line its accounting system, has decided to utilize a Cash
Receipts Journal in its operation. If the company is to record the cash sale of food for $18 which is the correct
entry?
A. Cash Cr. $18, Food Revenue Dr. $18,
B. Cash Dr. $18, Food Revenue Dr. $18
C. Cash Dr. $18, Food Revenue Cr. $18
D. Cash Cr. $18, Food Revenue Cr. $18

111. Beachside Coffee Shop, in an effort to stream line its accounting system, has decided to utilize a Cash
Receipts Journal in its operation. What will be recorded on the post ref column of this transaction?

Cash Receipts

Journal
Date

3/17/14

Account
Credited
Cash Sale

General Ledger Acct:
Cash 10
Acct Receivable 12
Retail Supplies 15
Beverage Revenue 41
Food Revenue 42
Retail Revenue 43

Post Ref

Cash
Dr

Bev
Revenue
Cr

$35

Food
Revenue

Cr
$35

Retail
Revenue
Cr

Customer Acct
CCC 345
FFF 367

A. 10
B. 15
C. 42
D. Ö
112. A computerized accounting system will not allow which of the following type of journalizing error?
A. Entering an amount in an incorrect account
B. Reversing the debit and credit account in a transaction
C. Processing a transaction that has unequal debits and credits.
D. Entering a transaction with an incorrect date.


113. Which of the following is not an advantage of a computerized system over a manual system?
A. transactions are recorded and posted at the same time
B. accuracy is usually better with a computerized system
C. current balances are always available
D. internal controls are optional to the computerized system

114. In addition to B2B and B2C transactions, e-commerce is commonly used in all of the following business
activities except:

A. supply chain management
B. regulatory compliance management
C. customer relationship management
D. product life cycle management

115. Month-end posting to controlling accounts in a computerized accounting system is not required because
A. controlling accounts are not used in computerized systems.
B. transactions are posted to accounts immediately.
C. the input operator can choose to post to accounts at any time.
D. computerized accounting posts entry at the end of the financial year.

116. Computerized accounting systems
A. is a tedious form of recordkeeping process.
B. improve the timeliness of reporting.
C. prevent all journalizing errors.
D. are only used in medium and large businesses.

117. Which of the following statements is false?
A. Most computerized accounting systems use principles from manual systems.
B. Subsidiary ledgers and special journals are only useful when a business doesn’t have a large number of
similar transactions.
C. Even small companies use computerized accounting systems.
D. Large companies often integrate their accounting system with their automated business systems.

118. What is meant by the term B2C?
A. Balance to cash
B. Business to cash
C. Book to capital
D. Business to consumer

119. E-commerce
A. accounts for less than 1% of all retail sales.
B. only relates to transactions between a company and a consumer
C. can improve the speed and efficiency of transactions.
D. increases paperwork.

120. When using a purchases journal
A. all cash and credit purchases are recorded in the journal.
B. posting to creditor accounts is only done at the end of the month.
C. the “Other Accounts” total is posted to Accounts Payable at month’s end.
D. there will always be an “Accounts Payable Cr.” column.

121. Which of the following could not be considered a business segment?
A. Region
B. Product
C. Customer Type
D. All of these could be considered business segments.

122. Segment data:
A. can be used for vertical, but not horizontal analysis.
B. is gathered from invoice data.
C. is only useful by product line.
D. analysis is required by GAAP.

123. When using a revenue journal:
A. both a “Fees Earned” and an “Accounts Receivable” column are included.
B. both cash sales and sales on account are posted to the journal.
C. revenues are normally recorded when the company sends customer invoices.
D. postings to customer accounts are done at month end.

124. Waller Company does business in two regional segments: North and South. The following annual revenue
information was determined from the accounting system’s invoice information:

Segment
North
South
Total revenues

2014
$ 75,000
260,000
$335,000

2013
$100,000
200,000
$300,000


Using horizontal analysis, determine the percentage change in revenues for the North region.
Round to one decimal place.

A. 22.4%
B. (25.0%)
C. 25.0%
D. (22.4%)
125. Waller Company does business in two regional segments: North and South. The following annual revenue
information was determined from the accounting system’s invoice information:

Segment
North
South
Total revenues

2014
$ 75,000
260,000
$335,000

2013
$100,000
200,000
$300,000

Using horizontal analysis, determine the percentage change in revenues for the South region.
Round to one decimal place.

A. 30.0%
B. 77.6%
C. (30.0%)
D. (77.6%)
126. The following is an example of:

Segment
College textbooks
High school textbooks
Elementary school textbooks
Total textbook revenue

2014
$78,000
129,000
105,000
$312,000

2013
$55,000
115,000
121,000
$291,000

Amount
$23,000
14,000
(16,000)
$21,000

Percent
41.8%
12.2%
(13.2%)
7.2%

Percent
25.0%
41.3%
33.7%
100%

2013
$55,000
115,000
121,000
$291,000

Percent
18.9%
39.5%
41.6%
100%

A. product analysis
B. vertical analysis
C. horizontal analysis
D. percentage analysis
127. The following is an example of:

Segment
College textbooks
High school textbooks
Elementary school textbooks
Total textbook revenue

2014
$78,000
129,000
105,000
$312,000

A. product analysis
B. vertical analysis
C. horizontal analysis
D. percentage analysis
128. Briefly describe the three-step process of accounting system development.

129. Define and describe an accounting system.

130. Utilizing the Revenue Journal, below, journalize the following five transactions of Porshe Creations:
(a)
(b)
(c)
(d)
(e)

On March 20th Porshe sells 25 cell phone covers to Xtreme at $4.50 per cover on invoice 887.
On March 21st Porshe sells 5 cell phone covers to Sidekick for $7.50 per cover on invoice 908.
On March 22nd Porshe sells 18 cell phone covers to Rock-On at $4.25 per cover on invoice 938.
On March 26th Porshe sells 200 cell phone covers to Micro at $3.75 each on invoice 959.
On March 29th Porshe sells 6 cell phone covers to Charmers for $8.35 each on invoice 997.


Pg 15
Revenue
Journal
Date:

Invoice
No.

Post
Ref.

Account Debited

A/R Dr.
Sales Rev Cr.

131. Discuss the process of posting from a revenue journal to the subsidiary ledger and to the general ledger.

132. The debits and credits from two transactions are presented in the following customer account:
NAME: Boogie Board Water Wear
ADDRESS: 2340 Xtreme Surf

Date
July 1
July 6
July 24

Item
Balance
Invoice 406
Invoice 456

Post Ref

Debit

R42

CR56

645

Credit

710

Balance
805
1,450
740


Describe each transaction and the source of each posting.

133. The following purchase transactions occurred during August for Backcountry Kayak Company.

Aug 1
Aug 6
Aug 14

Purchased kevlar kayaks for $5,600 on account from Gear Inc.
Purchased kevlar kayaks for $3,250 on account from Southland Company.
Purchased kayak paddles for $2,500 on account from Gear Inc.

Record these transactions in a purchase journal.
Purchases
Journal
Date

Acct Cr

Post Ref

Acct Pay Cr

Kevlar
KayaksDr

Other Accts
Dr

Post Ref

Amount

134. The debits and credits from two transactions are presented in the following creditor’s account:
NAME Windsurf, Inc.
ADDRESS 343 Coastline Road

Date
Aug 1
8
15

Item
Balance
Invoice 333
Invoice 567

Post Ref

Debit

CP38
P11

1,210

Credit

735

Balance
1,210
0
735


Describe each transaction and the source of each posting.

135. Define the meaning of B2C and B2B.

136. The discovery and correction of errors is important in a computerized system. What kind of error(s) might
occur in these systems? What type of error(s) will be prevented in a computerized system?

137. Describe and discuss e-commerce.

138. The Internet creates opportunities for improving the speed and efficiency of transactions. Name and
describe three key areas besides e-commerce where the Internet is being used for business purposes.

139. Morgan Company has the following segment revenues for fiscal 2014 and 2013.
2014
(in millions)
$825.0
325.5
215.5
1,366.0

U.S.
Canada
Other countries
Total Revenues

2013
(in millions)
$600.00
345.5
168.5
1,114.0

Prepare a horizontal analysis of the segment data using 2013 as the base year.

140. Morgan Company has the following segment revenues for fiscal 2011 and 2010.

U.S.
Canada
Other countries

Total Revenues

2011
(in millions)
$775.0
325.5
215.5
1,316.0

Prepare a vertical analysis of the segment data.

2010
(in millions)
$650.00
245.5
168.5
1,064.0