Accounting Information Systems, 13e (Romney/Steinbart)
Chapter 16 General Ledger and Reporting System
16.1 Describe the information processing operations required to update the general ledger and
to produce reports for internal and external users.
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
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
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
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
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.
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.
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
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
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.
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
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.
12) Depreciation expense and bad debt expense are examples of which type of adjusting journal
entry?
A) deferrals
B) accruals
C) revaluations
D) estimates
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.
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.
15) Corrections are entries made to correct errors found in
A) all journals.
B) special journals.
C) the general ledger.
D) the financial statements.
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.
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
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.
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
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.
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.
22) Explain the purpose of a journal voucher file.
1) 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.
2) 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.
3) 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.
4) 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
5) 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.
6) 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.
7) 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.
8) 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.
9) 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.
10) 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.
11) How is an audit trail used in the general ledger and reporting system?
12) Describe three threats in the general ledger and reporting system and identify corresponding
controls for each threat.
13) 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
14) 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
15) 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
16) 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
17) 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.
18) True or False: Periodic account reconciliations are a control that can be used to reduce the
risk of employees creating unauthorized adjusting entries.