Chapter 07 Accounting Information Systems
MULTIPLE CHOICE QUESTIONS
1)
Accounting information systems collect and process data from transactions and events, organize
them in useful reports, and communicate results to decision makers.
A)
True
B)
False
2)
Decision makers in practice do not need a basic knowledge of how accounting information systems
work because they can be relied upon to be accurate.
A)
True
B)
False
3)
Control, competency, compatibility, flexibility and cost-benefit are the five basic principles of
accounting information systems.
A)
True
B)
False
4)
Internal controls include policies to protect company assets and achieve compliance with laws and
regulations.
A)
True
B)
False
5)
The flexibility principle prescribes that an accounting information system be able to adapt to
changes in the company, business environment, and needs of decision makers.
A)
True
B)
False
6)
The compatibility principle requires that an accounting system report useful, understandable,
timely, and pertinent information for effective decision making.
A)
True
B)
False
7)
The cost-benefit principle prescribes that the benefits from an activity in an accounting information
system should outweigh the costs of that activity.
A)
True
B)
False
8)
The five basic components of accounting systems are source documents, input devices, information
processors, information storage, and output devices.
A)
True
B)
False
9)
Due to electronic files and Web communications, source documents are no longer required.
A)
True
B)
False
10)
Information processors capture information and enable its transfer to the system’s information
processing component.
A)
True
B)
False
11)
With advanced technology there is no need to trace information that has been entered into an
accounting information system to its source.
A)
True
B)
False
12)
Input devices involve converting data on source documents from written or electronic form to a
form usable for the system.
A)
True
B)
False
13)
Accounting information processes are structured to eliminate the need for professional judgment.
A)
True
B)
False
14)
When auditors audit financial statements and a company’s controls they rely on accounting system
databases.
A)
True
B)
False
15)
Input devices are the means to make accounting information available to users.
A)
True
B)
False
16)
Output devices include journal entries, keyboards and scanners.
A)
True
B)
False
17)
A special journal is used to record and post transactions of a similar type.
A)
True
B)
False
18)
A sales journal is used to record cash sales.
A)
True
B)
False
19)
The purchases journal is used to record purchases of merchandise on credit.
A)
True
B)
False
20)
The general journal is used for transactions not covered by special journals and for adjusting,
closing, and correcting entries.
A)
True
B)
False
21)
Special journals allow an efficient division of labor, which is also an effective control procedure.
A)
True
B)
False
22)
When posting from special journals, each individual debit and credit entry of similar transactions is
entered in the general ledger.
A)
True
B)
False
23)
Most transactions for merchandising businesses fall into four groups: sales, purchases, cash
receipts, and cash disbursements.
A)
True
B)
False
24)
Because special journals are designed to suit businesses, good systems design for a business could
include collapsing the sales and cash disbursements journal into one journal.
A)
True
B)
False
25)
A subsidiary ledger is a listing of individual accounts that contains detailed information on specific
accounts in the general ledger.
A)
True
B)
False
26)
Two common subsidiary ledgers are cash receipts and cash disbursements.
A)
True
B)
False
27)
The accounts receivable ledger is used for storing transactions data regarding individual customers.
A)
True
B)
False
28)
The controlling account, Accounts Payable in the general ledger has a separate subsidiary account
for each creditor in the accounts payable ledger.
A)
True
B)
False
29)
Equipment, inventory, and investments are other accounts that can include detailed information in
a subsidiary ledger.
A)
True
B)
False
30)
Subsidiary ledgers are not needed in perpetual inventory systems because the accounting system
captures sufficient details to support analyses that decision makers need.
A)
True
B)
False
31)
An advantage of online processing is that databases are updated in batches.
A)
True
B)
False
32)
Off-the-shelf accounting software is not adequate to meet the needs of small businesses.
A)
True
B)
False
33)
Enterprise resource planning software packages include the programs that manage a company’s
vital operations such as accounting, order taking, and manufacturing.
A)
True
B)
False
34)
Computer networks are links among computers giving different users and different computers
access to common databases, programs, and hardware.
A)
True
B)
False
35)
Enterprise resource planning software is primarily used for recording journal entries.
A)
True
B)
False
36)
Most companies use online processing instead of batch processing because online processing
immediately updates databases.
A)
True
B)
False
37)
The SAP enterprise-resource planning software is being used to help direct the operations of many
of the world’s largest companies.
A)
True
B)
False
38)
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.
A)
True
B)
False
39)
Segment return on assets is calculated by dividing segment average assets by segment operating
income.
A)
True
B)
False
40)
External users of financial statements are generally interested in segment information to understand
a company’s business activities.
A)
True
B)
False
41)
Segment information is not helpful to investors for evaluating a company’s profitability, risk, or
growth.
A)
True
B)
False
42)
A columnar journal is any journal with only one column.
A)
True
B)
False
43)
Individual transactions in the purchases journal are regularly posted to creditor accounts in the
accounts payable ledger.
A)
True
B)
False
44)
Three transactions that would be recorded in the sales journal are: (1) recording sales taxes (2)
recording sales returns and allowances and (3) recording purchases discounts.
A)
True
B)
False
45)
Each transaction recorded in the sales journal yields a debit to Accounts Receivable and a credit to
Sales.
A)
True
B)
False
46)
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.
A)
True
B)
False
47)
A procedure called direct posting of sales invoices involves posting sales directly to the customer
accounts in the accounts receivable ledger, making a period end journal entry, and avoiding the use
of the sales journal.
A)
True
B)
False
48)
Account balances in the general ledger and the subsidiary ledgers should be proved for accuracy
after posting is complete.
A)
True
B)
False
49)
A schedule of accounts receivable is a listing of all customer accounts and account balances.
A)
True
B)
False
50)
If the total balance of the accounts payable ledger equals the total of the controlling Accounts
Payable account, then the accounts are presumed to be correct.
A)
True
B)
False
51)
A trial balance is completed after posting but before proving the subsidiary ledger by preparing a
schedule of the controlling account.
A)
True
B)
False
52)
A company using the perpetual inventory system records the increase in cost of goods sold and
decrease in inventory at the time of each sale in the sales journal.
A)
True
B)
False
53)
The purchases journal is typically used to record only purchases of inventory.
A)
True
B)
False
54)
The sales journals of companies using the perpetual and periodic inventory systems differ in that
under the perpetual system a column is used to record cost of goods sold and inventory amounts for
each sale but not the periodic system.
A)
True
B)
False
55)
Which of the following statements regarding accounting information systems is not true?
A)
Accounting information systems communicate information to business decision makers.
B)
Accounting information systems are useful to effective decision making.
C)
Accounting information systems organize data in useful forms.
D)
Accounting information systems are not subject to internal control policies.
E)
Accounting information systems collect and process data from transactions and events.
56)
Which of the following statements is not true regarding internal control procedures?
A)
Internal control procedures include methods to achieve compliance with laws and regulations.
B)
Internal control procedures direct operations toward common goals.
C)
Internal control procedures are designed to safeguard company assets.
D)
Internal control procedures are not affected by the cost-benefit principle.
E)
Internal control procedures are designed to ensure reliable financial reports.
57)
The control principle for accounting information systems requires that the:
A)
System report useful, understandable, timely, and pertinent information for effective decision
making.
B)
System be able to adjust to changes in the company, business environment, and needs of
decision makers.
C)
System conforms to a company’s activities, personnel, and structure.
D)
Benefits from an activity outweigh the costs of the activity.
E)
System must have methods and procedures allowing managers to control and monitor
business activities.
58)
The flexibility principle of accounting information systems prescribes that the:
A)
System conforms to a company’s activities, personnel, and structure.
B)
System aid managers in controlling and monitoring business activities.
C)
System report useful, understandable, timely, and pertinent information for effective decision
making.
D)
Benefits from an activity in the system outweigh the costs of the activity.
E)
System be able to adapt to changes in the company, business environment, and needs of
decision makers.