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Questions
Q:
Account balances in the general ledger and the subsidiary ledgers should be proved for accuracy after posting is complete.
Q:
A procedure called direct posting of sales invoices can substitute for the special sales journal.
Q:
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.
Q:
Each transaction recorded in the sales journal yields a debit to Accounts Receivable and a credit to Sales.
Q:
Individual transactions in the sales journal are regularly posted to customer accounts in the accounts payable ledger.
Q:
Segment information is often useful to investors for evaluating a company's profitability, risk, and growth.
Q:
External users of financial statements are generally uninterested in segment information to understand a company's business activities.
Q:
Segment return on assets is segment operating income divided by segment average assets.
Q:
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.
Q:
The SAP enterprise resource planning software is already being used to help direct the operations of many of the world's largest companies.
Q:
Most companies use batch processing instead of online processing because batch processing requires continual updating of databases.
Q:
Computer networks are links among computers giving different users and different computers access to common databases and programs.
Q:
Enterprise resource planning software packages include the programs that manage a company's vital operations.
Q:
Off-the-shelf accounting software is not adequate to meet the needs of small businesses.
Q:
An advantage of online processing is up-to-date databases.
Q:
Subsidiary ledgers are not needed in perpetual inventory systems because the accounting system captures sufficient details to support analyses that decision makers need.
Q:
Equipment, inventory, and investments can each have its own subsidiary ledger.
Q:
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.
Q:
The accounts payable ledger is used for storing transactions data regarding individual customers.
Q:
A subsidiary ledger is a listing of individual accounts with a common characteristic.
Q:
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.
Q:
Most transactions for merchandising businesses fall into four groups: sales on credit, purchases on credit, cash receipts, and cash disbursements.
Q:
When posting from special journals, each debit and credit entry is entered as a separate amount.
Q:
The general journal is used for transactions not covered by special journals and for regular, adjusting, closing, and correcting entries.
Q:
The purchases journal is used to record cash purchases of merchandise.
Q:
A typical sales journal is used to record cash sales.
Q:
A special journal is used to record and post transactions of a similar type.
Q:
Input devices include journal entries, keyboards, scanners, and modems.
Q:
Input devices are the means to make accounting information available to users.
Q:
Auditors rely on accounting system databases when they audit financial statements and a company's controls.
Q:
Accounting information processes are structured to eliminate the need for professional judgment.
Q:
With online systems, all information storage should be off-line to protect the data.
Q:
With advanced technology there is no need to trace to its source information that has been entered into an accounting information system.
Q:
Accurate source documents are crucial to accounting systems to limit the possibility of entering faulty data into the system.
Q:
Due to electronic files and web communication, source documents are no longer required.
Q:
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.
Q:
The compatibility principle requires that an accounting system report useful, understandable, timely, and pertinent information for effective decision making.
Q:
The flexibility principle requires that an accounting information system conform to a company's activities, personnel, and structure and adapt to a company's unique characteristics.
Q:
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.
Q:
The five basic principles of accounting information systems are control, competency, compatibility, flexibility, and cost-benefit.
Q:
Accounting information systems are so accurate that decision makers in practice do not need a basic knowledge of how the systems work.
Q:
Accounting information systems collect and process data from transactions and events, organize them in useful forms and communicate results to decision makers.
Q:
The difference in the sales journal between the perpetual and periodic inventory systems is a column to record ___________________________ and __________________ for each sale that is used in the perpetual system but not in the periodic.
Q:
A _______________________________________ is a listing of accounts from the accounts payable ledger with their balances and the sum of all balances.
Q:
Individual transactions in the sales journal are posted regularly to customers' accounts in the ________________________________________.
Q:
The _______________________ ratio is a measure of a segment's profitability and is calculated as segment operating income divided by segment average assets.
Q:
A ____________________ is a part of a company that is separately identified by its products or services or by the geographic market it serves.
Q:
_______________________ are links among computers giving different users and different computers access to common databases and programs.
Q:
__________________ processing accumulates source documents for a period of time and then processes them all at once such as daily, weekly, or monthly.
Q:
___________________ processing enters and processes data as soon as source documents are available.
Q:
_______________________________________ refers to the programs that help managers direct a company's vital operations.
Q:
Using __________________ ledgers removes unnecessary details from the general ledger.
Q:
A __________________ is an all-purpose journal that can record any transaction.
Q:
A __________________ journal is used to record and post transactions of similar type.
Q:
____________________ are the means to take information out of an accounting system and make it available to users.
Q:
____________________ is the accounting system component that keeps data in a form accessible to information processors.
Q:
_____________________ are systems that interpret, transform, and summarize information for use in analysis and reporting.
Q:
______________________ capture information from source documents and enable its transfer to the system's information processing component.
Q:
______________________ provide the basic information processed by an accounting system and can include bank statements, billings to customers, and employee earnings records.
Q:
The __________________ principle requires that an accounting information system must be able to adapt to changes in the company, business environment, and needs of decision makers.
Q:
The __________________ principle requires that an accounting information system conform to a company's activities, personnel, and structure and must adapt to a company's unique characteristics.
Q:
The __________________ principle requires that an accounting information system report useful, understandable, timely, and pertinent information for effective decision making.
Q:
_____________________________________ consist of people, records, methods and equipment that collect and process data from transactions and events, organize them in useful reports and communicate results to decision makers.
Q:
The _____________________ principle requires that an accounting information system aid managers in controlling and monitoring business activities.
Q:
The __________________ principle requires that the benefits from an activity in an accounting information system outweigh the costs of that activity.
Q:
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: May 2
Purchased $25,000 of merchandise inventory on credit from the Sioux City Company, terms 2/10, n/30. Invoice dated May 1. May 3
Purchased $12,000 of merchandise inventory on credit from the Wichita Company, terms 2/10, n/30. Invoice dated May 2. May 3
Purchased $3,000 of office supplies for cash from Bettendorf Co. Check no. 1267. May 4
Purchased $36,000 of office equipment on credit from Office Outfitters, terms n/60. Invoice dated May 3. May 6
Paid the amount due for the merchandise purchased from Sioux City Company. Check no. 1268. May 6
Purchased $14,500 of merchandise inventory for cash from the Davenport Co. Check no. 1269. a. Use the purchases journal and the cash disbursements journal to record these transactions
b. Prepare a schedule of accounts payable as of May 7. There was no accounts payable on May 1. Purchases Journal Date
Account
Date of Invoice
Terms
PR
Accounts Payable Cr.
Purchases Dr.
Office Supplies Dr.
Other Accounts Dr. Cash Disbursements Journal Date
Ck. No.
Payee
Account Debited
PR
Cash Cr.
Purchase Discount Cr.
Other Accounts Dr.
Accounts Payable Dr.
Q:
132. 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. Answer: General Ledger Cash No. 101 Notes Payable No. 250 Date
PR
Debit
Credit
Balance Date
PR
Debit
Credit
Balance 7/1 4,500 Accounts Receivable No. 106 Sales No. 403 Date
PR
Debit
Credit
Balance Date
PR
Debit
Credit
Balance 7/1 6,700 7/1 30,000 Inventory No. 109 Sales Discounts No. 405 Date
PR
Debit
Credit
Balance Date
PR
Debit
Credit
Balance 7/1 15,000 7/1 400 Notes Receivable No. 115 Interest Revenue No. 415 Date
PR
Debit
Credit
Balance Date
PR
Debit
Credit
Balance 7/1 2,200 Accounts Payable No. 201 Cost of Goods Sold No. 502 Date
PR
Debit
Credit
Balance Date
PR
Debit
Credit
Balance 7/1 3,450 7/1 18,000 Accounts Receivable Journal Able Co. Bell Co. Date
PR
Debit
Credit
Balance Date
PR
Debit
Credit
Balance 7/1 4,750 7/1 1,950
Q:
131. 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. Dec. 1. Sold merchandise for $6,700 on credit to the Two Rivers Co., terms 2/10, n/30. Invoice no. 1455. Cost of the merchandise sold is $3,600. Dec. 1 Sold merchandise for $3,400 on credit to the Berlin Co., terms 2/10, n/30. Invoice no. 1456. Cost of the merchandise sold is $1,800. Dec 2 Sold merchandise for $590 for cash to the Ellison Co. Invoice no. 1457. Cost of the merchandise sold is $300. Dec. 3 Borrowed $10,000 from Custer Bank on a long-term note payable. Dec. 3 Sold merchandise for $7,200 on credit to the Amherst Co., terms 2/10, n/30. Invoice no. 1458. Cost of the merchandise sold is $4,000. Dec. 5 Received the amount due from the Two Rivers Co. from the sale on December 1. Dec. 6 Sold merchandise on credit for $950 to the Waupaca Co., terms 2/10, n/30. Invoice no. 1459. Cost of the merchandise is $500. Dec. 6 Received the amount due from the Berlin Co. from the sale on December 1. a. Use the sales journal and the cash receipts journal to record these transactions.
b. Prepare a schedule of accounts receivable. There were no account receivables at December 1. Cash Receipts Journal Date
Account Credited
Explanation
PR
Cash Dr.
Sales Discount Cr.
Accounts Receivable Dr.
Sales Cr.
Other Accounts Cr.
Cost of Goods Sold Dr. Inventory Cr.
Q:
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: May
2
Purchased $25,000 of merchandise inventory on credit from the Sioux City Company, terms 2/10, n/30. Invoice dated May 1. May
3
Purchased $12,000 of merchandise inventory on credit from the Wichita Company, terms 2/10, n/30. Invoice dated May 2. May
3
Purchased $3,000 of office supplies for cash from Bettendorf Co. Check no. 1267. May
4
Purchased $36,000 of office equipment on credit from Office Outfitters, terms n/60. Invoice dated May 3. May
6
Paid the amount due for the merchandise purchased from Sioux City Company. Check no. 1268. May
6
Purchased $14,500 of merchandise inventory for cash from the Davenport Co. Check no. 1269. a. Use the purchases journal and the cash disbursements journal to record these transactions
b. Prepare a schedule of accounts payable as of May 7. There were no accounts payable on May 1. Purchases Journal Date
Account
Date of Invoice
Terms
PR
Accounts Payable Cr.
Inventory Dr.
Office Supplies Dr.
Other Accounts Dr Cash Disbursements Journal Date
Ck. No.
Payee
Account Debited
PR
Cash Cr.
Inventory Cr.
Other Accounts Dr.
Accounts Payable Dr.
Q:
Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.
Q:
Partners in a partnership are taxed on the amounts they withdraw from the partnership, not the partnership income.
Q:
Accounting procedures for all items are the same for both C corporations and S corporations in all aspects.
Q:
Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.
Q:
A partnership is an unincorporated association of two or more people to pursue a business for profit as co-owners.
Q:
A partnership has an unlimited life.
Q:
A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.
Q:
If a partner withdraws from a partnership and the recorded value of his or her equity is overstated, then a bonus goes to _____________________; if the recorded value of the withdrawing partner's equity is understated, then a bonus goes to _______________________.
Q:
A partner can be admitted into a partnership by ________________________ or by ______________________________.
Q:
If partners agree on how to share income, but say nothing about losses, then losses are shared ___________________.
Q:
During the closing process, partner's capital accounts are _______________ for their share of net income and _________________ for their share of net loss.